Why February Is a Weak Month for Investment Returns

Going back to 1987, February has had the lowest maximum return and second-worst negative return among the six months (Nov-April) that are traditionally strong.

(Source: Dorsey Wright & Associates – “DWA”)

Why does it matter?

Despite what you might naturally guess, a strong January tends to improve the February return profile.

For February, the S&P 500 (SPX) is up right around 1.5% (MTD) as of this writing.

Below you will see every year the S&P 500 gained at least 5% in January since 1928 along with the market performance for the following month (Feb). (Source: DWA)

You’ll also see that those Februarys reported a return average (and also a median, btw) of almost 1%. This is significantly higher than the average return of 0.17% for “all Februarys” and was positive 64% of the time.

Of course, there are some significant outliers. Take a look at 1946 when the market gained more than 7% in January before losing almost -7% in February. Also look at 1934, when the market returned 11% in January before dropping almost -3.5% the following month.

The odds are on the side of the investor.

No guarantee but still, not a dark cloud by any stretch of the imagination.

I’ll conclude with the advice I gave heading into 2022 (graphic below) from a blog I wrote in December of 2021 which can be found here.

I’m not trying to rub it in. I’m just highlighting that sometimes the best advice is just good fundamental decision-making and getting the big things right.

If you are feeling like shit right now, PLEASE remember this feeling so that when the market gets back to the levels we saw in January 2021 (and we will…someday), you can tune up your plan, reallocate your portfolio, and raise the cash you wish you were living out of right now.

Check out our most recent episode of the Off the Wall Podcast: What is Direct Indexing and How Does it Work? In this episode, we talked to Pat McStay at OSAM about an approach to investing that is gaining popularity due to its ability to build allocations that are customized to an investor’s preferences, as well as harvest tax losses. We hope you’ll tune in.

Related: ChatGPT: Does AI Have a Place in Wealth Advice?