FEBRUARY COULD BE FORLORN FOR STOCKS
S& P 500 performs poorly after a new president takes over
Investors beware: February, already known as a blah month for the stock market, has an even more dreary performance record when a president is in his first term.
Since 1928, February has been the third- worst month of performance for the Standard & Poor’s 500 stock index, with an average loss of 0.05%, according to Bank of America Merrill Lynch data.
But February morphs into the worst month of the year and the losses mushroom to
nearly 4% when freshly elected presidents such as Donald Trump are early in their term at the White House. The S& P 500 has finished lower more than 75% of the time in February during presidents’ first terms.
Wall Street typically is hit with a plethora of policy proposals from an incoming president’s administration that creates uncertainty, lots of change and many unanswered questions on issues related to the economy, trade, jobs, taxes and financialmarkets.
This year is no different. The early Wall Street euphoria and resulting stock rally since Election Day powered by Trump’s proposals to boost U. S. businesses by slashing corporate taxes and reducing red tape has given way this week to an emerging investor caution and concern over President Trump’s protectionist and isolationist tendencies. The rise of policy risk under Trump has gained credence following his temporary immigration ban on a handful of Muslim- dominated countries and his fight withMexico over a wall along the USA’s southern border.
“February is historically a tough month where we typically see sell- offs,” says Bill Stone, chief investment strategist at PNC Asset Management. “The market weakness tends to coincide with the reality of the new president getting down to governing vs. all the good feelings prior.”
Wall Street’s retrenchment so far this week, with two consecutive 100-pointplus losses for the Dow, illustrates how investors can reassess the potential impact a president’s policy decisions can have on the economy and stocks.
Trump’s controversial decision to ban refugees and immigrants from Muslimmajority countries, for example, has raised fears that some of his policies will hurt the economy by taking his focus off moves such as lowering the corporate tax rate, rolling back regulations and pushing through fiscal spending.
The stock market’s recent struggles come at a time when it is expensive relative to history and, therefore, prone to falling if Trump is unable to fast- track his market- friendly moves.