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When to Buy Stocks Next Week

The S&P 500 tends to outperform when it's up YTD by Memorial Day

Senior Quantitative Analyst
May 22, 2019 at 6:15 AM
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The unofficial start to summer is next week, with U.S. markets closed on Monday, May 27, for Memorial Day. This week, I’ll show you how stocks have performed in the past during the holiday week.

Recent Weakness After Memorial Day

The table below summarizes the weekly returns of the S&P 500 Index (SPX) since 1971 (the year Memorial Day officially became the last Monday in May) and then also since 2010, which has been a pretty good time for stocks since the aftermath of the financial crisis. Over the longer term, Memorial Day week has outperformed the typical week for stocks. The index averages a 0.54% gain during the holiday week, but just a 0.16% gain during any week, looking at data since 1971.

But the more recent years have been an entirely different story. Since 2010, the S&P 500 declined an average of 0.77% during Memorial Day week, and was positive less than half the time. The typical week has averaged a 0.21% gain, with nearly 60% of them positive. 

S&P 500 Weekly Returns

Best and Worst Days to Trade Stocks Around Memorial Day

Here’s a table that breaks down the weekly returns by day. I include the Friday before Memorial Day as well, which has been just slightly bullish compared to a typical Friday. Since 1971, Tuesday and Thursday after Memorial Day have seen the highest average return. Looking at the other metrics, however, shows Tuesday has been a mixed bag.

Only 44% of Tuesdays have been positive during the week of Memorial Day, since 1971. Its average return is high due to its high volatility, especially to the upside. When Tuesday was positive, its average return was a lofty 1.24%. Since it’s a long weekend and Tuesday absorbs an extra day of news, the increased volatility is not a surprise. Thursday has been a much more consistently bullish day.

S&P 500 Returns Memorial Day Week

Since 2010, despite a bullish market overall, Memorial Day week has been a struggle. Tuesday is one reason for the poor weekly return -- averaging a slight loss with just four of nine returns positive -- but the main culprit has been horrible Fridays. Since 2010, Friday of Memorial Day week has averaged a loss of 0.84%, with just a third of those days positive. Last year, however, that trend was bucked as the S&P 500 jumped 1.09% the last day of the holiday week.

S&P 500 Returns Daily Memorial Week

Good Omens Ahead?

The table below is good news for the rest of the year. So far this year, the S&P 500's percentage gain is in the double digits. The table below looks at S&P 500 returns for the rest of the year depending on whether the index was positive or negative on Memorial Day.

When the index was up, then the rest of the year was positive 75% of the time, averaging a return of 5.90%. If stocks were down on the year on Memorial Day, then the index averaged a loss of 1.67%, with just 40% of the returns positive. Hopefully this tendency holds true for 2019.

S&P Rest of Year Returns


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