Leap day 2024 approaches, prompting some investors to wonder if this once-every-four-years occurrence holds any significance for the stock market. Historically, leap days have not been particularly lucky for investors, with both the S&P 500 and Dow Jones Industrial Average tending to decline on February 29. However, it’s essential to approach this observation with caution, as the sample size is small and may not be statistically significant enough for traders.
Matthew Weller, global head of research at City Index and Forex.com, noted that while leap days have seen stock market declines in recent years, this trend should be taken with a grain of salt.
Despite this, it’s still worth noting that the S&P 500 has experienced a median fall of 0.3% on leap days dating back to 1952, compared to a median rise of 0.05% on all other days since 1950. However, positive performances on leap days have been infrequent, occurring only 31% of the time, compared to a 52% positive rate on other days.
The Dow Jones Industrial Average follows a similar pattern, with the blue-chip gauge historically experiencing a median decline of 0.13% on leap days compared to a median gain of 0.05% on all other days. Leap days have seen positive returns only 38% of the time, in contrast to 53% for all other days.
Despite this historical trend, stocks are entering leap day 2024 with significant momentum. Both the Dow and the S&P 500 have notched numerous record highs in the early months of the year. As of Tuesday’s close, the Dow had gained 2.2% in February and 3.4% year-to-date, while the S&P 500 had risen 4.8% in February and 6.5% since the beginning of the year.
While acknowledging the limitations of analyzing such a small sample size, Matthew Weller pointed out that there is statistical evidence suggesting that the stock market tends to underperform on leap day. Given the recent strong performance of U.S. indices, particularly over the past month and four months overall, investors may want to exercise caution, especially in light of historical leap day trends.