Market Overview

Springing Forward, Falling Back: Trading Daylight Savings

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The markets are on a roll these days, with multiplicity and complicity of factors working in favor of the upside. The Dow Jones Industrial Average (INDEXDJX:.DJI) is trading off a record (21,116) and the S&P 500 (INDEXSP:.INX) is also trading shy of its closing high of 2,396 hit on March 1.

The Bull Run

The S&P 500 is up over 18 percent thus far this year. The current market rally commenced in early 2016, remained alive through the presidential campaign and picked up momentum in 2017 after cooling off post the elections.

^SPX Chart

^SPX

Source: Y Charts

Even as valuations are overstretched amid the market run up, identification of trends and patterns would help us profit from opportunities. By this weekend, we would have kick started the daylight saving, which began to be observed during the World War II.

What exactly is day lights saving? Does it really save time? If so, does it falsify the proverb ‘Time and Tide Waits for None?'

Springing Forward

During the Spring season (March, April & May), the sun rises early and sets early too. This pattern persists through the Summer months (June, July & August). Therefore, clocks are set an hour ahead to squeeze in more daylight during the day.

Falling Back

With the sun showing tardiness in its arrival during the Fall (October, November & December), the clocks are set an hour behind the Standard Time to gain an hour of sunlight, which we otherwise would have lost.

Though daylight saving does not literally save time for us, it does help us to save on a host of things, as we are able to accommodate more daylight into the day. We can save on utility expenditure to run our lamps, heaters, air conditioners etc.
However, recently, there have been calls to end this ritual of observing daylight saving. As recently as this week, Republican Congressman Jason Isaac has called for the abolition of this, stating that it is a man made creation.

Benzinga took a look at whether the start or end of the daylight savings has any correlation with the market movement. To deduce the relation or a lack of it, Benzinga looked at how the stock market (taking the S&P 500 as proxy) fared in the first session following the day light saving start and end dates in each of the years since 2010.

Daylight Saving Date/S&P 500 Performance

Year Start Date S&P 500 Change (in %) End Date S&P 500 Change (in %)

2016 March 13 +0.87 November 6 +0.81
2015 March 8 +0.40 November 1 +1.19
2014 March 9 -0.1 November 2 +0.62
2013 March 10 +0.3 November 3 +0.51
2012 March 11 -0.02 November 4 -0.34
2011 March 13 -0.4 November 6 +0.15
2010 March 14 -0.5 November 7 -0.22

Daylight saving is, thus, seen to be a non-event for markets, going by the historical performance of the S&P 500 Index. In almost all cases, the moves in either directions are only marginal to modest. Among the two daylight saving dates, the end date seems to show a bigger mover, with the returns positive in five out of the seven years we took into consideration. The gain percentage ranges from 0.2 percent to 1.2 percent.

The start date generated positive returns in three out of the seven sessions, and moves in either directions have not been significant.

One may have to keep in mind, several factors act in unison in moving the markets and therefore the moves cannot be solely traced back to the daylight saving schedules. Typically, November is a better month for the markets.

For a change, falling back has an edge over springing forward, at least as far as trading around daylight saving is concerned.

Related Links:

Parents Report Daylight Saving Time Negatively Affects Their Kids

Posted-In: daylight savingsEducation Trading Ideas General

 

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