A number of market catalysts are at play this week, with the FOMC decision on Wednesday foremost on traders’ minds. While time will tell if the Fed’s decision and tone send the market higher or lower, seasonality for the current week of the year is not necessarily on the side of the bulls. Back in early May, we highlighted how the week from 5/10 through 5/17 has historically been the weakest one week stretch for the S&P 500 over the last ten years, and sure enough this year the S&P 500 dropped nearly 1% during that period. This week looks to be another one of those weeks. As shown in the charts from our Seasonality Tool below, the week from June 17th through the 24th is one of the worst of the year in terms of the S&P 500’s performance as the index has seen a median loss of 0.73%. While short-term returns haven’t been friendly to bulls, the one and three-month returns have been a little bit friendlier with gains of 1.4% and 2.87%, respectively.
Looking back at the decade, the reason for the underperformance in this specific week has actually been driven by a few significant one-off events. Going back to 2010, just a month after the flash crash and when the economy and markets were still digging themselves out of the financial crisis, a number of factors including uncertainty in Europe, analyst downgrades of banks, and an FOMC statement citing a still-weak economy dragged the S&P 500 3.67% lower from the 17th to the 24th. That was the worst loss for the given week of the year in the past decade. The second worst came in 2013 after the Fed took a different tone and pointed to a more positive outlook as a signal that it could lay off the gas on the easy mone train. That sent the S&P 500 lower by 3.3%. Finally, in 2016, the UK voted on Brexit on June 23rd, and over the following two days, stocks sold off sharply before recovering most of these losses later in the month. While this seasonality only captures some of those Brexit-related losses (on the 25th stocks fell further), in 2016 the S&P fell for a total of 2% from June 17th to the 24th. Turning to this week, the FOMC is more likely to be a factor on market performance than seasonality, but the fact that the seasonal breeze is working against the market doesn’t help. Start a two-week free trial to Bespoke Institutional to access our Seasonality Tool and much more.