Historically, it’s so-called “Triple Witching” day, which comes next Friday, that really spooks the markets.
Calm down. Take a deep breath. Sure, the S&P 500 SPX 0% has suffered three straight down days. And today, Friday the 13th, is supposed to be the scariest day of the year.
But the stock market is by nature counterintuitive. Friday the 13th, as luck would have it, turns out to be a decent day to invest in equities: Since 1950, returns on Fridays the 13th have averaged 0.88%, more than twice the 0.34% average gain of trading days in general. And “the frequency of advance” is higher on Friday the 13th than on other days, says Sam Stovall, managing director for U.S. equity strategy at S&P Capital IQ. In other words, there’s a greater chance that the S&P 500 will post a positive gain on Friday the 13th (56%) than other days (52%).
That doesn’t mean today’s market performance will match the average, of course, or that the average will hold in the future. But the fact is, as Jeffrey Hirsch, editor in chief of The Stock Trader’s Almanac, has put it, “Friday the 13th has been erroneously associated with market crashes.”
In fact, there’s been only one significantly bad Friday the 13th in recent market history. That was October 13, 1989, the day of the so-called mini crash of ’89, when the S&P 500 lost around 6.1% of its value and the Dow Jones industrial average fell around 190 points (which back then amounted to a 6.9% drop). The losses were triggered in part by a crisis in the junk bond market.
On the other had, there’s actually good reason to be freaked out about next Friday, which is a so-called Triple Witching day on which contracts for stock options, index futures, and index options expire simultaneously. Four times a year, on the third Friday of March, June, September, and December, investors are forced to decide whether to roll over those contracts into new ones or to unwind their positions. As a result, on those days, and especially during the final hour of trading on those days, volatility tends to spike.
Even worse, in the week that follows each June’s Triple Witching Day, the Dow has lost ground in 21 of the past 24 years. Says Hirsh: “The weeks after Triple-Witching Day are horrendous.”