How Well Do Stocks Perform Around Easter?
Easter is an unusual time on the U.S. stock market calendar. Markets are closed on the Friday before Easter, Good Friday, even though it’s not a national holiday. This is the opposite of some other major days on the calendar, such as Veterans Day and Columbus Day, which are national holidays but not stock market holidays. But, does this annual market holiday trigger any unusual patterns for stocks? There’s no definitive answer to this question, but there are some seasonal quirks. While you shouldn’t build a trading program based around this anecdotal information, here’s a look at how stocks tend to perform around Easter.
Stock Market Patterns Around Easter
Wall Street tradition suggests that the market trends higher going into Easter weekend, but the actual evidence is not exactly overwhelming. One analysis by CXO Advisory Group suggests that there is a slight “up-down-up” bias to the market on the Thursday before Easter and the Monday and Tuesday that follow. However, in any given year, there’s no way to predict what the market will do. To base trading on “typical Easter patterns” is simply speculation.
Market Performance After Easter
There is one documented Easter-related market trend that has a little more teeth than the “up-down-up” anomaly noted by CXO Advisory Group. According to Schaeffer’s Investment Research, if markets are up year-to-date heading into Easter weekend, they tend to remain higher by the end of the year. In fact, according to Shaeffer’s, for the past 30 years through 2018, this correlation has been very high. In the five instances where the market was up by double-digits through Easter, it remained higher by the end of the year every single time. When the market was up less than 10%, it was still higher by the end of the year an amazing 86% of the time. Similarly, when the market was down heading into Easter, it remained down by an average of 1.9%.
What To Expect in 2021?
As any market pundit worth their salt will tell you, trying to predict short-term movements in the market is a fool’s errand. However, there are still some seasonal trends that you may be able to use to your benefit. Noted CNBC commentator Jim Cramer says that in 2021, some retail stocks might be worth picking up. Drawing from the work of market technician Larry Williams, Cramer says that historically, retail stocks enjoy an “Easter rally” in the early days of spring. Perhaps this is due to the wave of tax refunds that start hitting Americans’ bank accounts in the days around Easter, which often translates to increased retail spending.
The Bottom Line
There isn’t any hard evidence that stocks trade up or down around Easter. Short-term stock price movements are always hard to predict, and the Easter season is no different. Any gains or losses that may indeed occur around Easter are generally short-lived. The one trend that does seem to have some staying power is that if the market is up heading into Easter, it holds or extends those gains throughout the rest of the year. However, trying to trade stocks on the days immediately before and after Easter based on any type of short-term trend is best left to the experts.
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