Why the S&P's Day 1 Return Bodes Well For 2017

The SPX's current gain of 0.6% on Day 1 of the trading calendar is positively correlated with strong long-term returns

Jan 3, 2017 at 11:55 AM
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The S&P 500 Index (SPX) is surging today, putting the large-cap stock index on track for its first Day 1 win of a calendar year since 2013, when it jumped 2.5%. With today being the first session of 2017, it's fair to ask what the historical implications have been after a positive (or negative) initial session. Schaeffer's Senior Quantitative Analyst Rocky White crunched the numbers, and here's what he found for rest-of-January returns when looking back to 1929:

spx january returns jan 3

At last check, the SPX was 0.6% higher. Historically, this has corresponded with some pretty disappointing returns for January. On average, the SPX has advanced only 0.3% through the rest of the month, and has been positive less than half the time. In fact, compared to the other three columns on the chart above, initial day gains of less than 1% have corresponded with the worst rest-of-month returns.

However, the picture is much different when looking at rest-of-year returns. Here's another chart by White, documenting the SPX's performance based on the first day of the year:

spx rest of year returns jan 3

As you can see, the annual implications are extremely bullish when the S&P 500 advances less than 1% on the first day of the year. The average gain through year's end has been a gaudy 9.6% -- the best of the four columns -- with two-thirds positive. In other words, if history is any indicator, and the SPX ends the day where it is now, the index could run into some short-term speed bumps, but should be in good shape longer term.

Finally, if you want to dig in a little deeper on S&P 500 Index (SPX) performance vis-a-vis first-day returns, here's a third chart to digest. White simply documents the SPX's performance during the initial session of the year, then provides specifics on where it went for the rest of the year and the rest of January.

spx day 1 summary jan 3

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