Seasonal Strategies

Almanac Update February 2020: Can be Challenging in Election Years

Even though February is right in the middle of the Best Six Months, its long-term track record, since 1950, is rather tepid. February ranks no better than eighth and has posted meager average gains. Small cap stocks, benefiting from “January Effect” carry over; tend to outpace large cap stocks in February. The Russell 2000 index of small cap stocks turns in an average gain of 1.2% in February since 1979—just the sixth best month for that benchmark.

A strong February in 2000 boosts NASDAQ’s ranking in election years. Otherwise, February’s performance, compared to other presidential-election-year months, is mediocre at best with no large-cap index ranked better than ninth (DJIA and S&P 500 since 1950).

Election Year February Performance

The first trading day is bullish for DJIA, S&P 500 and NASDAQ. Average gains on the first day over the last 21-year period are right around 0.4%. Strength then tends to fade after that until the stronger sixth, eighth, ninth and eleventh trading days. Presidents’ Day is the lone holiday that exhibits weakness the day before and after (Stock Trader’s Almanac 2020, page 100). The Friday before this mid-winter three-day break can be treacherous and average declines persist for three trading days after the holiday going back to 1980.

February Vital Stats Table