Human nature sure is a weird thing. There is nothing like the prospect of a “day off” to lift the spirits. And for us working stiffs one thing we count on are “Holidays”. And in the immortal words of Jim Lang, “Heeeere they are”:
*New Year’s Day
*Martin Luther King Day
*President’s Day
*Good Friday
*Memorial Day
*July 4th
*Labor Day
*Thanksgiving
*Christmas
For the record, holidays have changed a bit over the years. Martin Luther King Day is relatively new as is President’s Day (which replaced Lincoln’s Birthday and Washington’s Birthday). But the idea is the same. There seems to be a “sense of euphoria” among investors around holidays.
The Test
Much has been written about stock market behavior around holidays. Certain days are better than others. But for our purposes we will keep it simple and uniform: We will look at price performance of the Dow Jones Industrial Average during:
*the 3 trading days before and
*the 3 trading days after each holiday
Our test will start at the close on 12/31/1948.
The Results
Figure 1 displays the growth of $1,000 invested in the Dow ONLY during the 3 days before and the 3 days after every stock market holidays since 12/21/1948.
Figure 1 – Growth of $1,000 in Dow Industrials 3 days before and 3 days after each holiday; 12/31/1948-7/1/2019
As you can see:
*Holiday days are no sure thing
*Holidays days display a clearly bullish long-term trend
A few facts and figures:
Figure 2 – Facts and Figures; Holiday Days versus all other trading days
As you can see:
*Holiday days have displayed roughly a 6% higher likelihood of being profitable (54.9% versus 51.8%) than all other trading days
*Holiday days have generated an average daily return (+0.0847%) that is roughly 4.2 times greater than the average daily return (+0.0203%) for all other trading days.
Summary
The bottom line is that “Yes”, the stock market does tend to perform better around stock market holidays. Given this incontrovertiable evidence I think our course of action is clear:
We MUST contact our elected representatives and DEMAND MORE HOLIDAYS!!!
Speaking of which….Happy 4th of July.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
