How Stocks Tend to Perform MLK Week

As we approach Martin Luther King Jr. Day, investors may be wondering how the stock market tends to perform during this holiday week. While the market's behavior can be influenced by various factors, historical data suggests some trends that could help inform investment decisions.



First, let's examine the overall performance of the S&P 500 during MLK week. Since 1998, when the market began officially observing the holiday, the average return during MLK week has been a loss of 0.53%. This is in contrast to the average return of 0.12% during other weeks. Additionally, only 42.9% of MLK weeks have been positive, compared to 56.2% of other weeks. The average positive return during MLK week is also smaller, at 1.11%, compared to 1.66% during other weeks.



Breaking down MLK week by the day, we find that three out of the four trading sessions – Tuesday, Thursday, and Friday – yield a negative average return for the S&P 500. Thursday and Friday have negative median returns during MLK week, and just 42.9% positive returns. By contrast, all four of those weekdays have positive average and median returns on an "anytime" basis over the past 20 years, and more than 50% positive returns.



However, it's essential to remember that correlation does not imply causation. The performance of individual stocks during MLK week may be influenced by various factors unrelated to the holiday itself. For example, some stocks may buck the trend of the general stock market during this holiday week, while others may underperform.



To illustrate this point, consider the following examples:

* Workday (WDAY) and Intuit (INTU) have been positive every year for the last 10 years during MLK week.
* Technology and software stocks tend to perform well during MLK week.
* JPMorgan Chase (JPM) and Eastman Chemical (EMN) have been defeated by the S&P 500 in each of the past 10 years during MLK week.
* Financial stocks and coal, oil, and gas stocks tend to underperform during MLK week.

In conclusion, while the S&P 500 has historically underperformed during MLK week, individual stock performance can vary significantly. Investors should consider these trends when making investment decisions but also be aware of the potential for individual stocks to buck the broader market trend. As always, it's crucial to do thorough research and consider multiple factors before making any investment decisions.

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