Quadrennial Leap Day: What It Means for Stocks

The last time the SPX saw a positive leap day was in 2000

Managing Editor
Feb 28, 2024 at 12:11 PM
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Subscribers to Chart of the Week received this commentary on Sunday, February 25.

When trading on Wall Street, we as investors are always looking for the angle that will get us a big profit with as little risk as possible, the strategy overlooked by most, historic data to give us a leg up, or the stone that’s been left unturned. And while this is hardly the first time we’ve experienced a "rare" day on the market, this week’s topic does only happen once every four years. Specifically, today we’ll be taking a deep dive into how stocks tend to perform during a leap year, as well as their historic performance for the month of March during this cycle. Ideally, this will give us an idea of whether we should expect notable outperformance, or if we should steer clear of big bets.

To carve us out a clearer picture, Schaeffer’s Senior Quantitative Analyst Rocky White pulled data from several outlines. The first table shows returns on the S&P 500 Index (SPX) for all days and leap days since 1950. First, just looking at leap days, the index has underperformed. There have been 13 leap trading days since 1950. The most recent three have been negative, as well as four others consecutively between 1952 and 1968, with a stray in 1996. The year 2020 is omitted due to it falling on a non-trading day (Saturday). In fact, the last time the SPX saw a positive leap day was in 2000.

On average, of the 13 returns since 1950, the SPX suffered a median leap day drop of -0.13%. Compared to all other trading days, which pulls a median return of 0.04%, underperformance is stark. Additionally, leap days are positive less than half the time, while regular days manage a positive outcome more than 50% of the time.

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Next, White narrows down his research and shows us how the first week (five trading days) of March has performed in both leap and other years. Per this data, the first five days have underperformed in leap years, sporting an average drop of almost 30%. For 2020, which was the most recent full month of March during a leap year, the SPX fell 12.5%.

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To add some context, we are just off the SPX’s 2023 gain of 24.2%, which preceded a nearly 20% plunge for the year prior. And while we’re barely halfway through the first quarter of 2024, the index already boasts an annual gain of nearly 7%. However, given the broader market’s historic underperformance during leap years, even if shares manage to cling to gains throughout the remainder of the calendar year, it’d be far from surprising if those gains were unimpressive.

 

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