Do Leap Years Yield Higher Stock Market Returns?
The Earth takes approximately 365.24 days to complete its orbit, so adding an extra day, known as a leap day, to the calendar every four years helps ensure that our calendars stay accurate with the actual length of a year.
Influence on Stock Market Trends
Despite being seemingly insignificant, the leap day still has some interesting effects on the stock market. On this day, the market tends to underform The S&P 500 SPX and Dow Jones Industrial Average(DJIA) both tend to decline. Matthew Weller, the global head of research at City Index and Forex.com noted that there is potential for lower market returns today, however, he pointed out that it is not important enough to be a big deal for investors.
According to Dow Jones Market Data, the S&P 500 has seen a median fall of 0.3% on the 13 days going back to 1952. Even before 1950, the index still underperformed 79% of leap days compared to a 48% negative rate on all other days. The Dow has also seen the same trend, seeing median losses of 0.13% on leap days compared to a median 5.5% gain on all other days.
What’s up with 2024?
However, this year seems different. The S&P 500 and DJIA have reached new highs and are continuing to grow. The market is doing well, and the leap year has not affected them. The history of underperformance in the stock market has not been correlated to overall economic decline. The extra day increases productivity and this is shown by increases in Gross Domestic Product(GDP).
Conclusion
All things considered, leap years do not have a very significant impact on the stock market. However, an extra day can mean an extra day for interest on loans and extra working hours for a working-class citizen. These show that the economy is more productive during leap years because there is an extra day of activity. Bullish investors should still be careful on days like this because the indices have been performing well for the past 4 months.
Sources
https://www.investopedia.com/us-economy-news-today-february-29-8602013
Image source: https://tse1.mm.bing.net/th?id=OIF.tj2LFxmfeyndRbwwjUBoVw&pid=Api&P=0&h=220
