U.S. stocks cemented a winning month in February, but the seemingly relentless rally raises the concern of whether investors will choose to take profits in the early days of March.
When glancing back in time, history shows that stocks have had very mixed performance after the S&P 500
SPX
rallied more than 4% in February, and some initial weakness in the first five trading days of March “wouldn’t be surprising,” according to Bespoke Investment Group.
The table below shows the S&P 500’s historical performance to start March after capping the previous month with an advance of more than 4%.
SOURCE: BESPOKE INVESTMENT GROUP
In the nine prior occurrences since 1953, the first day of March saw an average and median return of 0.26% and 0.23%, respectively, while the large-cap index closed higher only slightly more than half the time, said analysts at Bespoke in a client note viewed by MarketWatch on Friday.
The second day of March has tended to see positive and consistent returns for the S&P 500, with month-to-date gains in eight out of the nine instances, the Bespoke table shows.
However, the index has tended to decline thereafter. The fourth and the fifth trading days of March have both seen a modest decline in their month-to-date median performance, compared to average gain of 0.47% and 0.3%, respectively, through those days in every other March since 1953, according to data compiled by Bespoke.
“Overall, these figures are inconclusive, but some weakness at the beginning of the month wouldn’t be unexpected,” said Bespoke analysts.
U.S. stocks kicked off March in a subdued mood on Friday morning, but the Nasdaq Composite
COMP
continued to outperform after settling at a record high for the first time since 2021 in the previous session. The S&P 500 was rising 0.6%, to 5,128, while the Nasdaq was up 1% and the Dow Jones Industrial Average
DJIA
was edging up 0.2%, according to FactSet data.
See: U.S. stocks are off to their best start to a year since 2019 — and the rally is not just about the ‘Magnificent Seven’
Historical trends also tell a complicated story about the monthly performance in March. Long-term returns for the S&P 500 have been “middling” in March since 1928, with “unremarkable gains” compared with other months, said Bespoke analysts (see chart below).
Meanwhile, the S&P 500 has had ”very weak results” in March when it came off a hot streak where stocks surged in both January and February. In the nine similar instances since 1928, the large-cap index suffered a “painful” average monthly decline of 2.87%, according to Bespoke data.
