Leap Day is almost upon us, and investors may be wondering if a date associated with once topsy-turvy traditions has any significance for a stock market that’s kicked off the year with an epic rally.
The answer, though it should be taken with a grain of salt, is that Leap Day has tended to be not so lucky for stock-market investors over the years. The S&P 500 SPX and Dow Jones Industrial Average DJIA have both tended to decline on Leap Day, which is added to the calendar every four Februarys.
Why the grain of salt? The sample size is quite small and likely not sufficient to pass muster with statistically minded traders, said Matthew Weller, global head of research at City Index and Forex.com, in a note earlier this week.
Nevertheless, “it’s still worth being aware of the potential for lower than usual stock market returns on leap day,” Weller wrote, observing that for those more inclined to track recent trends, the stock indexes have fallen on each of the last three Leap Days when the market was open. Feb. 29 fell on a Saturday in 2020, the most recent leap year.
According to Dow Jones Market Data, the S&P 500 has seen a median fall of 0.3% on the 13 Leap Days going back to 1952. That compares with a median rise of 0.05% for the index on all other days since 1950. The S&P 500 has turned in a positive performance on just four of those Leap Days, or 31% of the time, versus a 52% positive rate on all other days.
It’s a similar story for the Dow, with the blue-chip gauge posting a median decline of 0.13% on Leap Day versus a median 0.05% gain on all other days. It’s up just 38% of the time on Leap Day, versus 53% for all other days.
Stocks are rolling into Leap Day this year with a head of steam. The Dow and S&P 500 have notched more than a dozen record finishes each so far in 2024. Through Tuesday’s close, the Dow had gained 2.2% in February and 3.4% to date in 2024. The S&P 500 is up 4.8% in February and 6.5% since Dec. 31.
“Acknowledging the obvious sample-size limitations of this analysis, there’s at least some statistical evidence that the stock market has tended to underperform on leap day, so bulls may want to exercise caution, especially after U.S. indices’ strong performance over the last month (and indeed last four months!),” Weller wrote.
Michael Destafano contributed.
