February Historically A Flat Month For Stocks, Small Caps Tend To Outperform

Over the last 20 years, February has been a mediocre month for stock market performance. Over that time frame, the S&P 500 has moved higher in 12 of those 20 years, accounting for a 60% "success rate." On average, the S&P 500 has an average gain of 0.2% in February. Compare that to July which has averaged 2.4% gains during the month over the last 20 years.

This is applicable if trading the SPDR S&P 500 Trust SPY or a similar ETF.

The chart says 2004 to 2023 to reflect the last 20 completed months of February. Chart courtesy of StockCharts.com. The number at the top of the column is the percentage of time the price has moved higher. The number at the bottom of the column is the average monthly return.

Over the past 10 years, the S&P 500 has performed about the same. It has moved higher in five of the last 10 years (50% of the time) and has averaged a return of 0.3% during the month.

Turning our attention to other indices for further confirmation, the NYSE Composite has witnessed upward movement in February in 10 of the last 20 years. That is 50% of the time, and the index has averaged a loss in February of -0.1%. Over the past decade, the NYSE Composite has experienced upward movement in five out of 10 years, with an average February return of -0.2%.

The NYSE Composite is a broad index, including companies from all industries and of varying sizes. It is representative of a "typical stock" and shows that a wide range of stocks don't perform well in February.

The Nasdaq 100 index, which is more focused on large technology companies, has shown upward movement in eight of the last 20 years (40%). The average February return of the index is 0.2%. Over the past ten years, the average return has been 0.6% and the index has moved up in four out of those 10 years (40%). This would be applicable if trading the Invesco QQQ Trust Series QQQ. Russell 2000 average yearly returns have underperformed those of the S&P 500 and Nasdaq 100 over the last 20 years. Yet the iShares Russell 2000 ETF IWM has managed to outperform these indices in February. IWM has moved up in the month 65% of the time and averaged a gain of 0.6%.

Seasonality, the study of how assets perform at different times of year, is backward-looking. It doesn't necessarily predict what will happen this February. 

The major stock indices, including the S&P 500, Nasdaq 100, and NYSE Composite indices remain in uptrends heading into the end of January.

Disclaimer: the author owns S&P 500 and Nasdaq 100 related ETFs in a long-term passive investing portfolio.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.