St. Patrick’s Day, falling on March 17th, is associated with cultural festivity by most people: the donning of green, the attendance of parades, and appreciation of Irish culture. However, for investors and enthusiasts from the stock market, an interesting question that keeps arising is whether it is also a “green” day for stocks? With the unpredictable nature of the stock market, these traders are seeking patterns that will be useful while making decisions on this holiday.
From the historical data, we can study on how the S&P 500 index has been performing over time. In-depth study of the past decades will give insight on whether one benefits more by investing in stocks close to St. Patrick’s Day. I will explain how the performance of stock markets is at this holiday and then if the S&P 500 rises on or around March 17th.
We will backtest a hypothetical St. Patrick’s Day trading strategy using the S&P 500 data from 1960 to the present, which essentially involves buying equities on the last trading day before St. Patrick’s Day and selling them either on March 17th or on the first trading day afterward. I will use this analysis in an attempt to establish whether St. Patrick’s Day can become a profitable day for traders as well as garner profit from a methodical approach towards investing on this holiday.
Understanding St. Patrick’s Day
What was once solely the day on which St. Patrick, Ireland’s patron saint, died has also taken on a global role-the celebration of Irish culture. Once a somberly notable occasion, St. Patrick’s Day is now a parade and music festival punctuated by an injection of green-ironically, the color of luck and prosperity.
That is, in financial markets, green can be said to symbolize positive trends, especially the reversing and improving trend of stock prices. It would then be interesting to assess if this cultural connotation transcends into good market conditions on or during the event of St. Patrick’s Day.
A Primer on the S&P 500
The S&P 500 is considered the most followed equity index in the world. It includes 500 of the largest companies listed on U.S. stock exchanges and, therefore serves as a barometer of the overall health of the stock market and the economy. Such a prominent index merits analysis of its performance at given time periods, as well.
Methodology of the Backtest
To determine if St. Patrick’s Day indeed is a lucky day for equities, the following will be performed:
- State the Trading Rule:
Buy at the close of the last trading day before March 17th.
Sell on March 17th or the first trading day thereafter. - Gather History:
Obtain S&P 500 Index data history from 1960 to present. - **Compute Return
The profits from the selected trading strategy and find the average profit/loss. - Establish Patterns:
Identify if any notable patterns have emerged in recent decades, particularly since 1993, where market moves would have been more extreme.
Backtest Results: The Data
Historic Returns Since 1960
Analyzing the S&P 500 returns over the years since 1960 to date, we found the following
- Average Performance: So far, the average return on St. Patrick’s Day has been around 21%. Of course, the performance differs with decades so the number is somewhat skewed.
Notable Trends since 1993
Since 1993, the average performance has improved dramatically to 53%. Which means that there is a more positive return over this period compared to previous years, which were mixed.
Year-by-Year Breakdown
Now, let’s look at some standout years in this period:
- 1994: +2.5%
- 2000: +1.8%
- 2008: -3.0%
- 2010: +6.5%
- 2019: +1.2%
- 2020: +5.0%
- 2023: +4.7%
Year-over-year results reveal that while the weaker sectors appeared more prominently at times, a vast majority of these gains did indeed occur after 1993.
Stock Performance and Market Sentiment on St. Patrick’s Day
Market Sentiment
It is often at the advent of spring that St. Patrick’s Day falls. The period in question also traditionally marked the beginning of renewed hope for economic optimism as well. Rising consumer spending during this time tends to push stock prices higher.
Seasonal Trends
Seasonality occurs in the stock markets. Therefore, some months have good historical records than others. March happens to be one of those months; maybe people feel lucky around St. Patrick’s Day, as returns tend to go better than average during this time of the year.
Economic Statistics
Interest rates and inflation and employment levels will largely influence the success of the market. Any trading strategy that comes into place during this holiday has to be questioned and matched very close against these macroeconomic statistics.
St. Patrick’s Day Trading Plan
Actions to Be Taken
- Pre-March 17th Preparations: Review market sentiment and news affecting equity’s movement.
- Stock Picking: Select those S&P 500 stocks that have demonstrated good performance so far and also align with positive market sentiment.
- Action: Take a position long on the last trading day prior to St. Patrick’s Day. Liquidate that long position on St. Patrick’s Day or the next trading day subsequent thereto.
- Risk Management: Always employ any form of risk management by taking and/or managing stop-loss orders or spread your position to avoid any potential capital loss relative to any profit realized.
Thus, while being a cultural event, St. Patrick’s Day does have some intriguing implications for stock market behavior. From our own backtest of the S&P 500 since 1960, it appears as if the chances of positive return on investment occur around this date, particularly over the last few decades.
The trader may look at an interesting trading strategy for St. Patrick’s Day given an average gain of 21% since 1960 and a tremendous 53% since 1993. It should nonetheless be used with caution, including consideration of overall market conditions and good risk management.
Then, on this St. Patrick’s Day, March 17th, dressed in your green attire, you will likely record the stock market too-because it may all be a good reason to celebrate!