Indicator of the Week: Should You Hold Stocks or Gold in March?

How the S&P 500 Index (SPX) -- and gold -- tend to fare in the month ahead

Senior Quantitative Analyst
Mar 4, 2015 at 8:10 AM
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February marked the biggest single-month return for the S&P 500 Index (SPX) since October 2011. This week, I'm taking a look at seasonality trends for March to see what the chances are of more gains.

The table below shows monthly return stats for the SPX since 1975. We are heading into what has historically been a pretty bullish part of the year. The two-month time frame of March-April has averaged a gain of 3.04% -- which is the second best two-month period return behind November-December, with a 3.16% gain.

S&P 500 Since 1975

Strong February = Strong March: Considering that February was just the best month in over three years for the SPX, with a gain of 5.5%, the table below is promising. It shows how March has performed depending on how February turned out. Each column, moving from left to right in the table, summarizes March returns following better and better Februaries. As February becomes stronger, so does March. From the last column in the table, there have only been four other times that February has gained at least 5%. Each time, March has been positive, averaging further gains of 3.67%.

S&P 500 March Returns since 1975

Gold Seasonality: We're heading into a bullish time for stocks, but that's not the case with gold by any means. Below I show the monthly returns for gold since 1975. In the month of March, gold has averaged a loss of 0.88%, with only 38% of those returns positive. By those two measures, it's the worst month of the year for gold.

Monthly Gold Returns since 1975

Starting in 2001, the metal notched 12 straight years of gains before tumbling over 25% in 2013, and then staying roughly flat in 2014. Despite the last couple of years, gold has a double-digit annualized return since 2001 (about 11% per year). It has been a completely different environment since 2001 for gold, which was a perpetual underperformer in the years prior. However, one thing that's remained consistent from those underperforming years is that March is a terrible month for gold. In March, the metal has averaged a loss of 0.56% -- even in these post-2001 boom times -- and has been positive a paltry 36% of the time. If history is our guide, then it's clear: Hold stocks for the next month, and not gold.

Monthly Gold Returns since 2001

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