Oil and bank stocks historically struggle during Memorial Day week
Traders have a long weekend coming up as markets are closed next Monday, May 28, for Memorial Day. This week, I’m looking at some seasonality trends to see how stocks have typically behaved during the holiday week. Additionally, I’ll list some stocks that have tended to do well and not so well next week.
Memorial Day Week Has Been Bearish in the Bull Market
Memorial Day officially became the last Monday of May in 1971. Since then, it has been a bullish week for stocks with the S&P 500 Index (SPX) averaging a gain of 0.54% -- which beats the typical weekly return since then of 0.16%.
Recently, however, the upcoming week has been dreadfully bearish. Since 2010, the first full year of the current bull market, the index has lost an average of 0.93% during the week of Memorial Day. Only three of the eight returns have been positive. While the market has done outstanding since 2010, this coming week of Memorial Day has been an exception.
Buyer Beware on Thursday
In the table below, I show how the S&P 500 has performed each day from the Friday before Memorial Day to the end of the holiday week. The week has underperformed each day except for Thursday. The worst day of the week, though, is clearly the Friday at the end of next week. The last day of the holiday week has averaged a loss of more than 1%. Six of the eight returns have been negative. For whatever reason, the last day of Memorial Day week has tended to sell off quite severely.
On the bright side, barring a sell-off over the next few days, the S&P 500 should be positive heading into Memorial Day. That has been a good omen for stocks for the rest of the year. When the index is positive through Memorial Day, it averages a 6.54% gain over the rest of the year with 78% of the returns positive. When it’s down heading into the long weekend, it has lost an average of 1.38% for the rest of the year, with less than half of the returns positive.
Best and Worst Stocks to Own During Memorial Day Week
As promised, below are the S&P 500 stocks that have done the best and worst over the past 10 years during Memorial Day week. Technology hardware companies and healthcare/pharmaceutical companies make up a decent portion of the bullish stocks, while oil and banking are the two sectors that show up the most on the bearish list.
