Presidents Day Holiday Effect: Stock Market Performance & Trading Strategy Backtest
George Washington’s Day/Presidents’ Day is a federal holiday in the US. But does it affect the US stock market?
The US financial markets are not open on Presidents’ Day or George Washington’s Day. Trading does not take place on any of the U.S. stock exchanges. Both the New York Stock Exchange and the Nasdaq will be closed on Presidents Day in 2026, and the bond market will also be closed. The bond market’s holiday schedule is determined by the Securities Industry and Financial Markets Association (SIFMA). The stock market will reopen for trading at normal hours on the day following Presidents Day. Trading volume is often lower during Presidents Day weekend as investors frequently stay out of the market, and the days surrounding Presidents Day can experience reduced liquidity and increased volatility as investors adjust their positions. Backtests determine that trading around this holiday is pretty random.
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- This article examines the impact of George Washington’s Day, also known as Presidents’ Day, on U.S. stock market performance. The analysis focuses on two specific trading strategies surrounding the holiday:
- Pre-Holiday Strategy:
- Approach: Enter a long position at the close of the Thursday before Presidents’ Day and exit at the close on Friday (holding the position for one day).
- Outcome: This strategy yielded an average loss of 0.15% per trade, indicating no significant advantage.
- Post-Holiday Strategy:
- Approach: Enter a long position at the close of the Friday before the holiday and exit at the close on the following Tuesday (holding the position for one trading day).
- Outcome: This approach resulted in an average loss of 0.3% per trade, with a win rate of 48%, suggesting a weak performance on the first trading day after the holiday.
- The findings indicate that there is no favorable “holiday effect” associated with Presidents’ Day in the U.S. stock market. Both pre- and post-holiday trading strategies demonstrated negative returns, implying that trading around this holiday does not provide a statistical edge.
What is George Washington Day/Presidents’ Day holiday?
Presidents’ Day is a federal holiday in the United States, officially known as Washington’s Birthday, which was established in 1879 to honor George Washington. Nearly half of U.S. states have renamed Washington’s Birthday to Presidents Day. The holiday is observed on the third Monday in Feb (‘Monday, Feb’), and the day observed may shift if the holiday falls on a weekend. In 1971, the holiday was moved to give federal employees a three-day weekend. Presidents Day falls in Feb, a month that has historically averaged a price return of only +0.1% for the S&P 500. Sometimes, the holiday is taken as a celebration of the birthdays and lives of all U.S. presidents.
Why do we celebrate it?
Presidents’ Day is celebrated to honor the birthdays of both George Washington (February 22) and Abraham Lincoln (February 12). As is usual for federal holidays, most federal workers and many private sector workers receive paid time off on Presidents Day. The third Monday in February is chosen because it falls between the two birthdays, and it offers workers a long weekend of rest.
When did we start celebrating it?
Presidents’ Day celebration started in the 1800s. After George Washington’s death in 1799, his birthday (February 22) became a perennial day of remembrance. But it remained an unofficial observance until 1879, when President Rutherford B. Hayes signed it into law.
The holiday initially only applied to the District of Columbia but was expanded to the whole country in 1885. In 1968, Congress passed the Uniform Monday Holiday Bill, which moved a number of federal holidays to Mondays, and the third Monday of February was chosen to celebrate Washington and Lincoln.
Is George Washington Day/Presidents’ Day a nontrading day?
George Washington Day is a non-trading day – both the New York Stock Exchange and the Nasdaq are closed on Presidents Day, and the U.S. bond market is also closed. The regular trading hours for the U.S. stock market are from 9:30 a.m. to 4 p.m. Eastern time, Monday through Friday. The stock market is closed on weekends, including Saturday and Sunday. NYSE Arca Equities, NYSE National, and NYSE American Equities are also closed on Presidents Day. Continuous trading resumes at normal hours on the day after Presidents Day, beginning at 9:30 a.m. Eastern time. In addition to Presidents Day, the market is closed on the following holidays: Good Friday in April, Juneteenth in June, Independence Day observed in July, Labor Day in September, Columbus Day in October, Veterans Day and Thanksgiving Day in November, and Christmas Day in December, as well as New Year’s Day (year’s day, new year’s day). If a holiday falls on a weekend (fall), such as Saturday or Sunday, the market may observe the holiday on an adjacent weekday (for example, Independence Day observed). New Year’s Day is a market holiday, and when it falls on a Thursday (year’s day thursday), the market is closed that day. Other Monday holidays in May (monday may) and September include Memorial Day and Labor Day, which also result in market closures.
Trading does not take place on the New York Stock Exchange or Nasdaq until those exchanges reopen on Tuesday, following the three-day break — weekend and Presidents’ Day on Monday.
Stock market presidents day
The second holiday of the year is President’s Day, officially called Washington’s Birthday, and is always on the third Monday in February. As with Martin Luther King Day, the February holiday falls between the calendar days 15 to 21.
Presidents’ Day Strategy – Backtest
Let’s backtest a strategy, a Presidents’ Day Strategy. Here are some trading ideas to look at with facts and statistics:
The first backtest has the following trading rules:
- We go at the close of the Thursday before the holiday; and
- We sell the next day on Friday (hold for one day).
For SPY, the ETF that tracks S&P 500, we get the following equity curve
George Washington seasonal trading strategy
The average gain per trade is a negative 0.15% but rather erratic so not an edge on a short strategy.
Let’s make a second backtest:
- We go at the close of the Friday before the holiday; and
- We sell the next trading day on Tuesday after the holiday (hold for one trading day).
We get the following equity curve:
President’s Day Holiday Effect in Trading
Just like in January, the first trading day after the holiday is a week one. The average gain per trade is -0.3% and the win rate is 48%.
We also backtested the performance the days after the holiday, and they are on average flat to negative.
Backtesting and Analysis: Measuring the Holiday Effect
The holiday effect in the stock market refers to the tendency for stock prices and trading volumes to behave differently around major holidays. This phenomenon is often observed as increased volatility or unusual price movements before or after holidays such as Presidents Day, Independence Day, Christmas Day, and Thanksgiving Day. Understanding and measuring this effect is crucial for traders and investors who want to optimize their strategies and manage risk during these periods.
Backtesting is a key tool for analyzing the holiday effect. By examining historical data from the New York Stock Exchange (NYSE), Nasdaq, and other major exchanges, investors can identify patterns in how the stock and bond markets respond to the holiday schedule. For example, the NYSE and bond markets typically close on federal holidays like Martin Luther King Jr. Day, Good Friday, Memorial Day, and Juneteenth National Independence Day. These closures, along with adjusted trading hours on days like Christmas Eve or the day before Independence Day (such as Friday, July 3), can lead to shifts in market behavior.
The Securities Industry and Financial Markets Association (SIFMA) also sets guidelines for when bond markets close, which can differ from the stock market’s schedule. For instance, bond markets may close early on certain holidays, affecting liquidity and price movements. By incorporating these variations into their analysis, traders can better anticipate how the market might react when a holiday falls on a Monday or is observed on a different date.
In addition to equities, the holiday effect can influence other asset classes, including precious metals like gold and silver. These markets often experience heightened volatility during holiday periods, as trading volumes thin out and market participants adjust their positions ahead of closures.
To quantify the holiday effect, investors often use statistical models and technical indicators. Regression analysis can help identify correlations between holiday periods and stock market performance, while machine learning algorithms can uncover more complex patterns in historical data. By backtesting strategies that account for the holiday schedule, traders can determine whether certain periods—such as the days surrounding Presidents Day or Thanksgiving—offer consistent opportunities or risks.
Staying informed about the holiday calendar and adjusting trading strategies accordingly is essential, especially during times of economic uncertainty or increased market volatility. By understanding how the stock market, bond markets, and even precious metals respond to the holiday schedule, investors can make more informed decisions, manage risk more effectively, and potentially capitalize on unique trading opportunities that arise during these periods.
In summary, a thorough analysis of the holiday effect—using backtesting, historical data, and advanced analytics—can provide valuable insights for anyone navigating the complexities of Wall Street. Whether you’re trading stocks, bonds, or other assets, being aware of how holidays like Presidents Day, Labor Day, and Christmas Day impact the market can help you achieve better results and avoid unnecessary surprises.
FAQ:
Why do we celebrate Presidents’ Day?
Presidents’ Day is celebrated to honor the birthdays of both George Washington (February 22) and Abraham Lincoln (February 12). It provides workers with a long weekend of rest. Presidents’ Day is the federal holiday celebrated on the third Monday in February.
Is Presidents’ Day a non-trading day in the US?
Yes, Presidents’ Day is non-trading in the US. The financial markets close for the celebration, and trading resumes on the following Tuesday after the three-day break. The celebration of Presidents’ Day started in the 1800s and became an official observance in 1879 when President Rutherford B. Hayes signed it into law.
Is there a Presidents’ Day holiday effect in the stock market?
The backtest indicates that the holiday effect is absent in February. There are 29 trades, the average gain is -0.24%, the win ratio is 52%, the profit factor is 0.77, and the max drawdown is 9%. Other holiday effects in the US markets include Martin Luther King Jr. Day, Easter, Memorial Day, 4th of July, Labor Day.
Is the stock market open on presidents day?
No, the U.S. stock market is not open on Presidents’ Day. Presidents’ Day (also known as Washington’s Birthday) is a federal holiday and one of the standard market closures. This also applies to bond markets and many related financial institutions.
