Forget Trump or North Korea, the market may just be struggling because of Tax Day
Investors, traders and the financial media are struggling to discover the exact reasons behind the market's recent woes.
Geopolitics is the latest scapegoat, followed closely by President Donald Trump's renewed commitment to difficult health-care reform before tackling tax cuts.
But Josh Brown , whose instincts are usually on the money about this sort of stuff, tweeted this out at the end of last week:
We ran the numbers on the market's performance around Tax Day going back to 1980 and turns out Josh could be exactly right.
According to hedge fund analytics tool Kensho, here is the average performance of some major market benchmarks during the two weeks before Tax Day, which falls on Tuesday:
The S&P 500 (INDEX: .SPX) is barely in the green, on average. The Nasdaq composite (NASDAQ: .IXIC), which contains tech stocks popular with retail investors, and the Russell 2000 index (Exchange: .RUT), a holder of smaller stocks typically owned more by individuals than institutions, actually average a loss.
Now look what happens in the two weeks after Tax Day, on average:
The average gain quadruples for the S&P 500, and the Russell 2000 and Nasdaq go from average losses to increases greater than 1 percent. The probability of a gain during those two weeks vs. the two before Tax Day also increases significantly.
So there seems to be a clear pattern.
Like any of these seasonal patterns, it's more apparent during some years than others. This year is likely a good one for the trend, given the strong gains since the election. And doubts about tax reform being made law by the end of 2017 may also be exacerbating the tax-related selling this year.
Disclosure: NBCUniversal, the parent of CNBC, is a minority investor in Kensho.
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