February Almanac: Worst S&P 500 Month in Post-Election Years By: Jeffrey A. Hirsch & Christopher Mistal | January 23, 2025 | Email | Print

February is in the middle of the Best Six Months, but its long-term track record, since 1950, is not impressive. February ranks no better than sixth and has recorded meager average performance except for Russell 2000. Small cap stocks, benefiting from “January Effect” carry over in some years; historically tend to outpace large cap stocks in February. The Russell 2000 index of small cap stocks turns in an average gain of 1.1% in February since 1979, the sixth best month for that benchmark. Russell 2000 has had a challenging January this year with only brief hints of the “January Effect.” Without this typical momentum, Russell 2000 could continue to struggle this February.

 

 

February’s post-election-year performance has been wretched since 1950, ranking dead last for S&P 500, NASDAQ and Russell 2000. Average losses have been sizable: –1.3%, –3.0% and –0.9% respectively. February ranks tenth for DJIA in post-election years with an average loss of 0.8%. February 2001 and 2009 were exceptionally brutal. NASDAQ dropped 22.4% in February 2001, its third worst monthly loss ever. One minor reprieve from the longer-term gloom is all five indexes have advanced in the last three post-election year Februarys (2013, 2017, and 2021).

 

 

The first trading day of February is bullish for DJIA, S&P 500, NASDAQ, Russell 1000 and 2000. Average gains on the first day over the most recent 21-year period (solid lines in above chart) range from 0.41% by DJIA to 0.84% by Russell 2000. However, after a strong opening day, positive momentum has tended to fade until around the seventh trading day. From there until around the 12-trading day all five indexes have historically enjoyed gains. But those gains have not held through the end of February. Poor post-election-year-February performance (dotted lines in above chart) loosely follow a similar trajectory to the last 21 years, performance has been weaker with a peak occurring much earlier in the month, around the fifth or sixth trading day.

 

Monthly options expiration week had a spotty longer-term record and was improving prior to the arrival of Covid-19 in 2020. Since the week has been down four or five times depending on the index. S&P 500 and Russell 1000 have been down five weeks straight. Russell 2000 has resisted the negative trend in the past two years. The week after was also improving prior to 2020 but also appears to have returned to its bearish longer-term tendency.

 

Presidents’ Day is the lone holiday that exhibits weakness the day before and after (Stock Trader’s Almanac 2025, page 100). The Friday before this mid-winter three-day break can be treacherous and average declines persist for three trading days after the holiday going back to 1980. In recent years, trading before and after the holiday has been more bullish. S&P 500 has been up 10 of the last 14 years on the day before and NASDAQ has been up 7 of the last 12 years on the day after.