Tuesday, January 31, 2017

What To Expect In February...

With January now in the books and the S&P having advanced 40 points, we looked back at February's past to see what might be in store for stocks in the coming month:

February Stats
  • Going back to 1950 February is the 4th worst month with average gain of just 0.04%
  • However it is also the 4th least volatile month
  • Over the last 20 years it ranks as 5th worst month with average loss of -0.18%
  • Over the last 10 years it ranks middle of the pack as it's the 6th best month with average gain of 0.39%.  However it's also been the 3rd most volatile month
  • Post-Election years lean bearish

Last 20 years average Daily Trend.  No real consistency as the month is choppy.  

Post-Election Years
  • Average return is a loss of -1.84%
  •  9 of 16 February's have been lower
  • Average draw-down from January close is almost twice that of the average draw-up
  • -2.99% average loss in instances where the incumbent party lost
  • Average loss of -2.40% when a Republican has won

While the stats above lean in the bearish camp all hope is not lost.  If we look at the average February following a positive January the story gets more positive.
  • Average return is a positive 0.65%
  • 64% of February's have been positive when January was positive
  • Average draw-up from the January close is 90bps greater than the average draw-down

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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