Indicator of the Week: What the First 50 Days Tell Us About 2015

Do the first 50 trading days set the tone for the rest of the year?

Senior Quantitative Analyst
Mar 18, 2015 at 7:37 AM
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You often see articles about "the first 100 days of whatever." So to beat everyone to the punch, I'm writing an article about the first 50 trading days of this year (Monday was the 50th trading day of the year). Below I show the year-to-date return for the S&P 500 Index (SPX) this year compared to the average return since 2010, and to the average return over the past 50 years. So far in 2015, the index has lagged the average returns. The return so far this year is about 0.5%, compared to an average of 2.25% over the past 50 years.

S&P 500 returns

The first 50 days have actually been a pretty good predictor for the rest of the year. These next two tables show how the SPX has performed for the rest of the year depending on the return of the first 50 trading days. It seems the better the return in the first 50 days, the better the market has tended to do over the rest of the year. This year, after 50 days (as of Monday's close), the SPX was up just over 1%.

S&P 500 returns last 25 and 50 Years

Individual Stocks: It seems the first 50 days sets the tone for the market for the year going forward. What about for individual stocks? To do this analysis, looking at the 500 biggest stocks by market capitalization, I found the best and worst 20 stocks for each of the last two years after 50 trading days. Then I found the returns for those stocks going out over the next 50 days and over the rest of the year. The results are pretty interesting.

First, this table looks at 2013. The green columns show the returns of the 50 best performers over the first 50 trading days. The returns are night and day. The best 20 stocks through 50 trading days averaged a return of almost 5.5% over the next 50 days. The worst performers went on to average a loss of over 8%. Looking out the next year, the outperformers averaged a 30% gain over the rest of the year, with 90% of them positive. The worst 20 stocks gained just over 8% for the rest of the year, with just half of them positive (the S&P 500 gained over 15% for the rest of the year).

2013 stock returns

The table below shows the same information for last year. After the first 50 trading days, the next 50 days saw stocks revert back to the mean. In other words, the best performers lost value (an average of 1.54%) while the worst performers did very well (they gained an average of 8.76%). However, that was not the case at all for the rest of the year. For the rest of the year, the best performing stocks averaged a gain of 8.76%, with 85% positive. The worst performers averaged a 21% loss, with only 20% of them positive.

2014 stock returns

Knowing that information, here are the 20 best and 20 worst stocks so far in 2015 (I'm considering the 500 stocks with the biggest market capitalization).

20 best stocks
20 worst stocks
 

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