Taking a deep dive into how the S&P 500 tends to perform Memorial Day week
The unofficial start to summer is next week, with markets closed on Monday for Memorial Day. Today, I’ll show you how stocks have performed in the past during the holiday week. Also, I will list stocks that have tended to do well and not so well next week.
The table below summarizes the weekly returns of the S&P 500 Index (SPX) since 1971 (the year Memorial Day officially became the last Monday in May) and 2010, which has been a pretty good time for stocks since the aftermath of the financial crisis. The longer-term Memorial Day week has outperformed the typical week for stocks. The index averages a 0.52% gain during the holiday week but just a 0.17% gain during any other week. In more recent years though, there has been an entirely different story. The S&P 500 declined an average of 0.50% during Memorial Day week and was down as many times as it was up. Since 2010, the typical week has averaged a 0.22% gain with nearly 60% of them positive.
Weekly Returns by Day
Here’s a table that breaks down the weekly returns by day. I include the Friday before Memorial Day as well, as it has been bullish compared to a typical Friday. Since 1971, Tuesday and Thursday of Memorial Day week have had the highest average return. Looking at the other metrics, however, shows Tuesday has been a mixed bag. Only 43% of Tuesdays have been positive since 1971 during the week of Memorial Day. Since it’s a long weekend and Tuesday absorbs an extra day of news, it’s not a surprise it has been the most volatile day. With a positive average return despite a low percent positive, it tells us the bigger Tuesday returns have tended to happen to the upside. Thursday has been a much more consistently bullish day.
Since 2010, despite a bullish market overall, Memorial Day Week has struggled. Tuesday is one reason for the poor weekly return averaging a slight loss with just five of 12 returns positive. The main culprit for the bad week has been horrible Fridays. Since 2010, Friday of Memorial Day week has averaged a loss of 0.63% with just 42% of those days positive. Recently, however, that trend has been bucked, as in four of the last five years the S&P 500 has had positive Fridays during the week of Memorial Day.
A Bad Omen for Rest of Year
The table below is bad news for the rest of the year. So far this year, the S&P 500 is down over 15%. The table below looks at S&P 500 returns for the rest of the year after Memorial Day week depending on whether the market was up or down heading into the week. Price action before Memorial Day seems to set the tone for the rest of the year. If the index was up, then the rest of the year was positive about 74% of the time, averaging a return of 5.97%. If stocks were down on the year, then after Memorial Day the S&P 500 averaged a slight loss with just 44% of the returns positive. There has only been one other year in which the index was down 10% or more on Memorial Day (1977). The S&P 500 lost 2.65% for the rest of the year. If you look at years for which the index lost at least 5% then there were nine returns, and they weren’t good. The S&P 500 averaged a loss of 3.74% with just a third of the returns positive. Hopefully, this trend changes in 2022.
Individual Stocks
As promised, below are the S&P 500 stocks that have done the best and worst since over the past 10 years during Memorial Day week. For whatever reason, technology hardware companies make up a large proportion of the bullish stocks.
Home construction and materials for home construction are two sectors that show up the most on the bearish list.
