The Dow’s Average Return by Day of Year

As I mentioned before, I crunched all of the Dow’s daily closings for the last 117 years. Today, let’s take a look at the Dow’s return by Day of the Year.

This chart shows what the Dow does, on average, throughout the year. To make things clearer, I began the chart at 100 as the start of the year.

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There’s an old Wall Street saying that investors ought to “sell in May and go away.” Well, there does appear to be some truth to that. From May 6th to October 29th, the Dow has gained, on average, only 0.3%. That’s just shy of half the year. For the other half, the Dow has gained an average of 6.96%.

For the worst part of the year for the Dow, we can zero in the stretch from September 6th to October 29th. Over that span, the Dow has lost an average of 2.51%. I re-ran the numbers to see where the market’s early September peak was in relation to Labor Day. The answer is that it comes on the Wednesday immediately following Labor Day. After that, the market has had a tendency to slide for the next seven weeks.

The best brief period of the year for the Dow has been the famous Santa Claus rally. From December 21st to January 7th, the Dow has gained an average of 2.91%. That’s pretty impressive when you consider that makes up 40% of the Dow’s annual gain, yet it comes in just half a month, and that includes two holidays.

Just to be clear, these numbers don’t include dividends. Also, I don’t believe there’s any advantage for investors in trading around these events. I just think it’s fascinating that after 117 years, some definite patterns have evolved.

Posted by on April 16th, 2013 at 12:06 pm


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