Following a Strong February, How U.S. Stocks Fared in March

The conclusion of February saw U.S. stocks securing a month of gains, prompting speculation about whether investors might opt to capitalize on their profits as March begins. The historical perspective reveals a varied performance for stocks after a robust 4% rally in the S&P 500 (SPX) in February, with some anticipation of initial weakness in the early days of March, as suggested by Bespoke Investment Group.

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Reflecting on historical data since 1953, when the S&P 500 experienced a monthly gain exceeding 4%, Bespoke Investment Group notes that the first day of March demonstrated an average and median return of 0.26% and 0.23%, respectively. The large-cap index closed higher slightly more than half the time on the first day of March in these instances. The second day of March typically exhibited positive and consistent returns for the S&P 500, with gains recorded in eight out of nine occurrences.

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Nevertheless, the subsequent days in March have witnessed a decline. Both the fourth and fifth trading days of March displayed a modest drop in their month-to-date median performance, contrasting with the average gains of 0.47% and 0.3%, respectively, observed through those days in other March instances since 1953, according to Bespoke's compiled data.

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While these figures are inconclusive, Bespoke analysts acknowledge that some weakness at the beginning of March would not be unexpected, considering the historical patterns.

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March commenced with a subdued atmosphere in U.S. stocks, although the Nasdaq Composite (COMP) continued to outperform, reaching a record high for the first time since 2021 in the preceding session. The S&P 500 showed a 0.6% rise to 5,128, the Nasdaq was up 1%, and the Dow Jones Industrial Average (DJIA) edged up 0.2%, according to FactSet data.

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Examining the broader historical trends for March reveals a complex narrative. Long-term returns for the S&P 500 in March since 1928 have been described as "middling," characterized by "unremarkable gains" compared to other months, as indicated by Bespoke analysts. On the other hand, when March follows a hot streak with stock surges in both January and February, the S&P 500 has experienced "very weak results." In nine comparable instances since 1928, the large-cap index suffered an average monthly decline of 2.87%, as per Bespoke's data.

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