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“Intuition will tell the thinking mind where to look next.” – Jonas Salk
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It may be the shortest month of the year, but after four straight days of declines for the S&P 500, February is seeming like a long month. This morning, futures are looking to reverse their losing ways, but based on some of the intraday selloffs we’ve seen in recent days, you can’t be too sure of anything. February’s weakness has put a damper on individual investor sentiment as the weekly survey from AAII showed that bullish sentiment plunged from 34.1% down to 21.6%. February hasn’t been a fun month so far, but when you consider the fact that the 10-year yield is up over 40 basis points MTD, it could have been a lot worse than a 2% decline for the S&P 500 and a decline of less than 1% for the Nasdaq.
We just got a slug of economic data with GDP, Personal Consumption, Core PCE, and Jobless Claims. Results relative to expectations were mixed. GDP was revised lower, both initial and continuing jobless claims were lower than expected, while Core PCE was higher than expected at 4.3% vs forecasts for 3.9%. As one might expect given the stronger inflation data, equity futures have seen a modest decline in the immediate aftermath of the report while interest rates are higher.
Even after this month’s weakness, the S&P 500 is still up nearly 4% YTD, but those gains have come with a good deal of volatility. Yesterday was the 35th trading day of the year, and already nearly half of all trading days have seen daily moves of at least 1%. Going back to 1953 which was the first full year of the five-trading day workweek, there have only been five other years where there were as many or more 1% moves in the first five trading days of the year. Of the five prior years where 17 or more of the first 35 trading days were moves of 1% or more, the only year where the S&P 500 was up YTD was 1988 (+7.51%). In all four other years, the S&P 500 was down in the first seven weeks of the year with losses ranging from 3.6% in 2003 to a plunge of 17.7% in 2009.
That’s the past. Looking ahead, of the five prior years shown, that volatility to start the year was followed more often than not by gains. In four of the five years shown below, the S&P 500 was higher for the remainder of the year. The only exception was a big one when in 2008, the S&P 500 started the year off with a decline of 8.5% in the first 35 trading days of the year and then went on to drop an additional 32.7% for the remainder of the year.
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