The Economic Symposium at Jackson Hole is historically a choppy week for equity markets–a tug-of-war between bulls and bears as expectations for The Symposium’s outcome are established. The first set of columns in the chart below averages the daily return of the $SPX in the days surrounding The Symposium.*
What might be of note is the cyclicality of the returns. Additionally, the opening day also produces the worst return for equities. “Open -1″ and “Close +2″** are most consistently positive at 71.43% of the time (20 of 28). However, not all Symposiums are set in the same economic background. While there will never be the exact same set of circumstances and you can adjust by any number of factors, I prefer to adjust by the $SPX return as it roughly establishes a baseline for perception of current and / or discounted future economic conditions.
In a previous post, I segregated positive summer sessions (i.e. May – August) from negative ones. On April 30, 2012 the $SPX closed at 1397.91 and is trading +0.90% since; which is fairly close to its historical average. Nevertheless, adjusting the Jackson Hole data for positive summer sessions only*** drastically changes the landscape. (See second column set in chart above)
In 1978, the $SPX experienced a positive summer session, but The Symposium was held in May, thus 1978 is excluded from the latter data analysis. The euphoria of a positive summer session appears to carry into the Jackson Hole meeting. The following apply to the “Positive Summer” data:
- All days in data set are, on average, positive
- The largest single-day decline (among all 6 days) increases to -1.45% (from -6.79% in “All Symposiums”)
- The largest returns for the day prior, opening day, and closing day are all part of “Positive Summer” data
- The previous bullet point almost applies to the day after the close as well
- The day prior to The Symposium is positive 91.67% of the time
- The opening day of The Symposium is positive 83.33% of the time (compared with 50% in “All Symposiums”)
Basically, Symposiums held during “Positive Summers” produce consistently good returns and remove much of the negative ones. As much as I want to hate this rally, history is suggesting that I shouldn’t. I’m cautious about the potential opportunity–on either side of the trade–at this point in time and early September, $SPX 1450, or some combination of the two are still the appropriate exit points.
*For Symposiums starting on a Thursday. This excludes the years of 1980, 1982, 1983, 1985, 1986, 1988, 1989. In 1985, there were two official Economic Symposiums at Jackson Hole (here); the symposium excluded was held in August
**Adjusting for Labor Day in seven instances
***In most cases, The Symposium was part of the summer session and there may be a partial feedback loop between overall summer returns and dates surrounding The Symposium