While Leap Day only comes around once every four years, it’s even more rare that investors can use the extra day to trade stocks—a phenomenon that might seem to have a profound effect on the market.
This year is only the 18th time in the history of the S&P 500 that Feb. 29 has fallen on a day the market was open, according to S&P Capital IQ, which analyzed the typical consequences of the bonus day.
First, the bad news: Leap Day generally has not been kind to stocks. The S&P 500 only rose 35% of the time on the previous 17 such trading days, and on average posted a 0.1% decline.
In keeping with that tradition, the S&P 500 fell slightly on Monday (even after starting the day up), trading down less than a percentage point.
Still, investors shouldn’t read too much into stocks’ performance on Leap Day itself—and here’s where the good news comes in. While the S&P 500’s average returns on Feb. 29 were negative, they were still so close to flat that they “didn’t offer much of a performance clue” as to the stock market’s direction for the rest of the year, hardly pushing it one way or the other, according to S&P Capital IQ’s U.S. equity strategist Sam Stovall.
In fact, for the previous Leap Years where the market was open that final day of February, the S&P 500 ended the year up more than 70% of the time, averaging a gain of 6.4%. Indeed, since 1960, the only Leap Years in which the S&P 500 fell were 2000 and 2008—the years of the worst market crashes since the Great Depression.
But other than those special circumstances, Leap Years tend to be good for stocks—even if that performance has nothing to do with Feb. 29 itself. Leap Years, of course, also happen to be election years, when stocks have tended to turn in positive returns (with the exception of the recent crashes). Either way, even if stocks disappoint today, there’s a strong likelihood that they’ll have better luck by the end of the year.