Thanksgiving week ushers in the holiday season for Americans. It also kicks off a seasonal bullish bonanza for investors who look to historical probabilities before stuffing their portfolios.
According to Yahoo Finance data and calculations, the S&P 500 has ended the week green three-quarters of the time going back to 1961 — with an average and median gain of 0.3%. For the entire week, the S&P 500 has been positive two-thirds of the time, allowing investors to harvest a median gain of 0.75%.
Looking through the history books, Wednesdays just prior to T-day have delivered the best historical gains of the week. By far.
In the midst of the Global Financial Crisis, 2008 was the best year for Thanksgiving week — with the S&P 500 posting a gain of 12.0%. The worst year was three years later in 2011, which suffered a 4.7% loss.
Jeff Hirsch at the Stock Trader's Almanac first noticed the seasonal turkey-day tendency in 1987. Since then, the week's pattern has become a bit less bullish — particularly on Wednesdays and Fridays. That's because, incredibly, both of those two weekdays were green in 34 of the 35 years prior to 1987.
Nonetheless, if an investor bought the S&P 500 the Friday before Thanksgiving and sold it the Friday after beginning in 1961, they'd be up 42% as of last year — a compounded annual growth rate of 6.2%, according to Yahoo Finance data.
It might not be better than being invested continuously, but not bad for only a few days of exposure a year.
When it comes to sectors, energy has fared the best — posting median gains of 1.5% with a 74% win rate since 1999. Close behind, the sectors for materials, tech, consumer discretionary, and communication services have all allowed investors to gobble up median gains of 1.0% or more.
Financials have fared the worst over time — up only 0.2% with a win rate of 57%. Utilities, healthcare, real estate, and industrials follow close behind with only small wins. When it comes to sector performance during the holiday week, it's feast or famine.
But the bullish seasonals don't end this week, as Hirsch pointed to a number of patterns that persist into the new year.
"November [to] January is the year’s best consecutive 3-month span," wrote Hirsch, adding, "Then there’s the January Effect [of] small caps outperforming large caps in January, which begins in mid-December."
Finally, capping the holiday season and kickstarting the new year is the famous "Santa Claus Rally," which was first identified and published by Yale Hirsch (father of Jeff) in 1972.
Larry McMillan, founder of Option Strategist, had the bright idea of combining all these seasonals into a super-seasonal trade — when investors can buy the Tuesday before Thanksgiving and hold through the second trading day of the new year.
Since 1950, the S&P 500 is up nearly 80% of the time over this roughly six-week time frame — posting an average gain of 2.57%.
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