February Almanac, Vital Stats & Strategy Calendar: Marginal Average Gains By: Jeffrey A. Hirsch & Christopher Mistal | January 26, 2016 | Email | Print

February is up slightly more than half the time since 1950, with marginal average gains for DJIA and S&P 500. However, small cap stocks, benefiting from “January Effect” carry over; tend to outpace large cap stocks in February. The Russell 2000 index of small cap stocks turns in an average gain of 1.3% in February since 1979—just the seventh best month for that benchmark. 

 

A very strong February in 2000 boosts NASDAQ and Russell 2000 rankings in election years. Otherwise, February’s performance, compared to other presidential-election-year months, is mediocre at best with no large-cap index ranked better than seventh (DJIA and S&P 500 since 1952, Russell 1000 since 1980).

 

February also does not have a solid long-term track record when full-month January was negative. Going back to 1950, DJIA has declined 24 times in January, S&P 500 26 times and NASDAQ (since 1971) 16 times. Regardless of index, the following February was down more often than up and the average performance was solidly negative. However, the last three down Januarys have been followed by substantial February gains.

 

 

The first trading day is bullish and DJIA, S&P 500 and NASDAQ have traded higher in 11 of the past 13 years. Average gains on the first day over this 13-year period are right around 0.5%. Strength then tends to fade after that until the stronger eighth, ninth and eleventh trading days. Expiration week has a spotty longer-term record, but the week after has a clear negative bias with averages losses across the board over the past 26 years.

 

Presidents’ Day is the lone holiday that exhibits weakness the day before and after (Stock Trader’s Almanac 2016, page 88). The Friday before this mid-winter three-day break is exceptionally treacherous and average declines persist for three trading days after the holiday going back to 1980.