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“Instinct is a marvelous thing. It can neither be explained nor ignored.” – Agatha Christie
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After a good first week of the year for stocks, futures are in a bit of a retreat this morning, and a key reason for the caution is that Fed Chair Powell will be speaking on Central Bank Independence at 9 AM eastern. Given his recent penchant to crush the market, no one really wants to make a big stand ahead of that speech. Along with lower equity prices, bond yields are higher while crude oil is up marginally even as natural gas pulls back.
In terms of economic data, NFIB Small Business Sentiment came in weaker than expected and fell back down near its lowest levels in a decade. The only other report on the calendar today is Wholesale Inventories at 10 AM.
By nature, people put a lot of weight on first impressions, and that’s especially true in the stock market. If the year starts out on a positive note, it is thought to set a positive tone for the rest of the year and vice versa. With the new trading year fully one week old, below we take a look at how the S&P 500 has performed in the first week of this year compared to all other years since 1953 when the five-day trading week started. The S&P 500’s first week gain of 1.37% this year is definitely an improvement over last year’s decline of 1.87%, and it’s also more than double the 0.58% median gain dating back to 1953. But does it mean anything?
The scatter chart below shows the S&P 500’s performance in the first five trading days of the week versus the rest of the year, and the shaded area indicates all periods where the S&P 500 rallied more than 1% in the first five trading days. Since 1953, there have been 27 other years where the S&P 500 gained 1%+ in the first five trading days, and of those years, the S&P 500’s median rest of year performance was a gain of 13.9% with positive returns 79% of the time. For all other years, the S&P 500’s median rest-of-year return was a gain of 5.6% with gains 59% of the time. Maybe first impressions really do matter.
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