Stocks to Buy and Sell Before Labor Day

When stocks are up big before Labor Day, the rally tends to last through year-end

Senior Quantitative Analyst
Aug 29, 2018 at 7:31 AM
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Labor Day is next week, so U.S. markets are closed on Monday. Barring a pullback over the next couple of days, the S&P 500 Index (SPX) should be up more than 5% on the year heading into the holiday. Historically, this has been good news for the stock market through the rest of the year.

Holiday Checkpoint Could Signal Big Gains Ahead

The S&P 500 has been positive the last nine years in a row from Labor Day through the end of the year. The last time it went lower was the end of 2008, when it fell about 30% in the last three months of the year during the financial crisis.

The table below shows that over the past 20 years, there were nine occasions when the index was up at least 5% heading into Labor Day. In those nine years, the rest of the year was positive every time, with an average gain of 6.95%. The other years were positive just 73% of the time, with an average return of only 1.34% -- and way more volatility, going by the standard deviation of returns.

SPX after Labor Day by YTD

What to Expect This Week and Next

Looking at the rest of this week, the Friday before the long Labor Day weekend has tended to be slightly more bullish than normal. The last day of this week has averaged a gain of 0.11% (and a median return of 0.27%), with 60% of the returns positive. By and large, though, nothing jumps out as significant.

best days before labor day

The next table below focuses on the holiday-shortened week of Labor Day. Tuesday has been positive just half the time -- but when it has been up, it has gone up significantly. Tuesday, therefore, has averaged a notable 0.25% return during the week of Labor Day, compared to the average Tuesday gain of 0.05%, looking back 20 years. The end of Labor Day week has been just the opposite; Thursday and Friday both average a loss, with the average negative return exceeding 1%.

Overall, Labor Day week has been bearish for stocks over the past 20 years. The S&P 500 has averaged a loss of 0.11%, with just half of the returns positive.

SPX Labor Day week

Best and Worst Stocks for Labor Day Week

Finally, below are lists of the 25 best and worst S&P 500 stocks during Labor Day week, looking back 10 years. The stocks are sorted first by the percentage of positive returns, and then by average return.

Eyeing the stocks with the best returns, FAANG stock Facebook (FB) tends to have a good week. Looking at the worst stocks during the week, utilities seem to make up a disproportionate number of those stocks.

best stocks labor day week

worst stocks labor day week

 

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