- The Valentine’s Rally dates back to the early 1900s
- “Romantic” sentiment might spur higher consumer spending
- Historically, the stock market tends to gain in the first half of February and lose in the second half, with the gains on average ending slightly higher than the losses
- Investors typically may buy on the 10th calendar day of February and sell on the 14th or the next trading day
Love and the stock market: What is a Valentine’s Rally?
The Valentine’s Day Rally dates back to the early 1900s when the stock market experienced increased activity around Feb. 14.
Some of the reasons include:
The “romantic” sentiment associated with Valentine’s Day, may lead to increased optimism and risk-taking among investors. The occasion may spur higher consumer spending, resulting in increased corporate profits and higher stock prices. However, some argue that it might be influenced by investors buying in anticipation of positive market sentiment.
Between 1985 and 2022, the S&P 500 ended February up 0.37 per cent. Over the past 10 years, that gain rose to 0.43 per cent.
How do investors play the Valentine’s Rally?
Quantified Strategies reports that they buy on the 10th calendar day of February and sell on the 14th, or the next trading day. The backtest results show that, on average, the strategy returned 0.35 per cent per trade with a 62 per cent win rate over 2.8 days, indicating a notable Valentine’s Day Rally effect. Emerging markets (EEM) have shown the best performance during the Valentine’s Day Rally, with an average gain of 1.4 per cent.
Just like the Santa Rally, the Valentine’s Rally is a non-scientific indicator.
During this month of love, check out our “Top Romantic Stocks.”
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