Tax deadline coming: stocks tend to rise. Every year I get the same question in response to the same phenomenon. The market seems to stall and droop in the two weeks leading up to tax day (April 15th), and then seems to recover.
The usual explanation is that some people withdraw money to pay taxes, which seems to make sense.
We asked our partners at Kensho about this, and the data seems to bear out this well-worn piece of folk mythology.
Since 2005, in the 10 trading days before April 15, the S&P 500 is only up 30 percent of the time, with a flat average return.
But in the 10 trading days AFTER April 15th, the S&P is up 90 percent of the time, with an average return of 2.0 percent.
From up 30 percent of the time before April 15th to up 90 percent of the time after April 15th. That's significant.
This worked across the board: the Dow was up 100 percent of the time (10 out of 10 years!), the Nasdaq 90 percent.
Certain sectors are big winners: Industrials, energy and utilities were up 100 percent of the time as well in the 10 trading days after April 15, all with gains in excess of 2 percent.