The Anticipation of Market Performance Ahead of Good Friday
The day before Good Friday has a historical reputation as a positive trading day on the stock market, but can we expect this trend to continue in 2025? With the stock and bond markets closing for the holiday, many investors are hopeful for favorable outcomes as they navigate a landscape marked by volatility this year.
According to market data provided by Dow Jones and analyzed by @AlmanacTrader, the average performance of significant stock indexes leading up to Good Friday reveals a notable trend. Since 1980, the S&P 500 has averaged a gain of 0.38% the day before Good Friday, while the Dow Jones Industrial Average has experienced an average increase of 0.3%, and the Nasdaq Composite has advanced by 0.46%. In contrast, these indexes typically see an average daily gain of just 0.04% for the S&P and Dow, and 0.05% for the Nasdaq during the same historical time frame.
Market Sentiment Amidst Recent Volatility
However, analysts emphasize caution when interpreting these numbers this year. The ongoing volatility stirred by political factors, particularly President Donald Trump’s tariff strategies and his administration’s frequent communications, has created an environment of uncertainty. Eric Schiffer, chair of the Patriarch Organization, noted, “Past performance is no promise in a tariff world,” emphasizing the unpredictable nature of market responses to political announcements.
Recent performance records leading up to Good Friday also introduce an element of skepticism. On the Wednesday prior, the major indexes all dipped significantly: the S&P 500 fell by 2.24%, the Dow by 1.73%, and the Nasdaq by 3.07%. This contrasted sharply with historical data which indicated positive trends for those indexes two days before Good Friday.
Factors Influencing Market Behavior
Several factors contribute to the positive market momentum often observed in the days leading up to Good Friday. Pre-holiday activities are typically associated with increased trading volumes as investors manage their positions. For instance, professional traders frequently opt to purchase stocks to cover short positions during an extended market closure. Dave Weisberger, a seasoned market strategist, remarked that geopolitical developments during a three-day weekend could influence a surge in buying activity in anticipation of market movements. He noted, “More can happen geopolitically over a three-day weekend” compared to a two-day weekend.
Yet, there’s a flip side. Traders might also reduce their exposure before the holiday by selling off assets. The nature of borrowing costs, combined with the tendency to cover short positions, often leads to upward price pressure as the holiday approaches. Additionally, the reality of tax season plays a role — many individual investors may find themselves buoyed by anticipated tax refunds, which adds liquidity to the market just in time for the holiday.
The Role of Seasonality and Investors’ Psychology
Spring generally brings a sense of optimism, which can extend to market sentiment. Chris Barnes, president of Escalent, classified seasonality as a tangible human phenomenon that can considerably affect investment behaviors. Yet, analysts still stress that the current market is encumbered by tariff-related uncertainty, making it challenging to predict outcomes confidently. “Does this breather come with a Thursday-night news dump?” Barnes questioned, illustrating the unpredictable market environment.
The Outlook for Next Week
Even if a positive trend emerges for Thursday, investors should be aware of a historical trend that may follow. The Monday after the Good Friday holiday weekend historically trends downward. On average, the S&P 500 dips by 0.18%, the Dow by 0.13%, and the Nasdaq by 0.25% following this break, as indicated by data from @AlmanacTrader.
As the market approaches this year’s Good Friday, many analysts and investors eagerly look forward to any reprieve from the volatility of recent weeks. Christopher Grisanti, chief market strategist at MAI Capital Management, acknowledged the need for a market break: “I don’t know anyone in our business who isn’t dying for a breather.” With this sentiment shared industry-wide, the approaching holiday may afford investors not only a pause but also an opportunity to reassess their strategies moving forward.
Ultimately, while the historical trends suggest a possibility of gains heading into Good Friday, the unpredictable market conditions demand cautious optimism.
