Market Trends Ahead of Martin Luther King Jr. Day
As the US prepares to honor the legacy of Martin Luther King Jr. this Monday, investors are wondering what the shortened trading week has in store for the markets. Can we anticipate the direction of the S&P 500? Let’s dive into the historical data to uncover any patterns.
A Historical Look at MLK Week Performance
Since 1998, the S&P 500 has averaged a loss of 0.57% during the week of Martin Luther King Jr. Day, with only 41% of those weeks ending in the green. In contrast, other weeks have seen an average gain of 0.17%, with 57% of weeks posting positive returns. Even when the holiday week has been positive, the upside has been limited, with average positive returns significantly lower than usual.
Breaking Down the Week by Trading Day
The week tends to get off to a rocky start, with Tuesday averaging a loss of 0.26% and less than half of the returns being positive. In fact, the S&P 500 has declined on the day after Martin Luther King Jr. Day in seven of the last eight years. Wednesday, on the other hand, has historically been the best day for the market, while Friday has been the worst.
Stocks That Defy the Trend
While the overall market has struggled during MLK week, some stocks have bucked the trend and performed well. The table below shows the top performers, sorted by percent positive and then by average return. Technology and software stocks dominate the list, with Workday (WDAY) and Intuit (INTU) being the only two stocks to have beaten the S&P 500 every year for the last 10 years.
The Worst Performers
On the flip side, some stocks have consistently underperformed during MLK week. The table below shows the worst performers, sorted by least positive returns and then by average return. Financial stocks, as well as coal, oil, and gas stocks, are overrepresented on this list. JPMorgan Chase (JPM) and Eastman Chemical (EMN) are notable exceptions, having been defeated by the S&P 500 in each of the past 10 years, despite not making the list due to their 30% positivity rate.
What to Expect This Week
As we head into the shortened trading week, investors would do well to keep these historical trends in mind. While past performance is no guarantee of future results, being aware of the patterns can help inform investment decisions. Will this week buck the trend, or will history repeat itself? Only time will tell.
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