Most investors know that certain days of the week are better for stocks than others. Over the past 10 years, for example, the S&P 500 index has fared best on Wednesdays and worst on Tuesdays, with median returns of 0.10% and 0.00%, respectively. These differences, of course, are relatively small. But some rather more noteworthy divergences crop up when you break down the patterns by sector.
In that case, Friday happens to be the best day of the week, both in absolute terms and relative to the market, when the median daily performance of all the various S&P 500 economic sectors are taken into account. The winning group? Energy, with an average return of 0.21% and 0.17%, respectively. Coming in a close second, in nominal terms at least, is the information technology group, with a gain of 0.21% on Wednesdays and 0.20% on Mondays.
As far as which day of the week is the worst for any particular sector, there are two contenders for the crown. In absolute terms, Monday has been the laggard, with the energy sector declining by an average of 5 basis points over the course of the past decade. In terms of relative performance, however, Wednesdays are at the bottom, dragged down by the -0.12% median return of financial shares.
Given that Wednesday has tended to be strongest day of the week for the market as a whole, it's not surprising that five sectors -- health care, industrials, and consumer staples, along with energy and information technology -- have also performed best on that day based on median returns.
But the picture is somewhat more muddled as far as disappointing days are concerned. While Tuesday has been the laggard overall, three sectors -- financials, telecom services, and materials -- have actually fared worst on Thursdays, while three others -- health care, industrials, and consumer staples -- have yielded their poorest returns on Fridays.
So what does it all mean? While it's hard to make the case that investors can arbitrage the historical divergences for anything resembling a consistent profit, knowing which sectors have performed best or worst on any particular day of the week could prove valuable when used in conjunction with a portfolio execution strategy.
For example, an investor who is involved in the energy sector might achieve some incremental performance gains by looking to sell shares in the group near the close of business on Fridays, or otherwise by accumulating them late in the day on Mondays (or Tuesdays, which have also been something of a laggard historically).
In contrast, it might make sense for those who trade in and out of financial shares to favor accumulating them on Wednesdays and Thursdays. Over the past decade, both have tended to be disappointing days for this group in either relative or absolute terms.
To be sure, all of these past tendencies are just that, and there's no guarantee they will remain the same in future. Even so, they are a pattern worth knowing about. Why? Because there's a good chance that in sectors like energy and financials, these biases likely reflect structural factors or money manager idiosyncrasies that probably won't disappear overnight.
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