The Leap Year Market Effect
Markets haven’t fared well historically on their extra calendar days, so investors may be in luck to see this quadrennial 365th leap day land on a Saturday. Markets are shut, sell-offs are on pause, and traders are hopefully getting some air.
It’s been a fearful February with the coronavirus infecting supply chains and freezing world trade. Everyone knows that. Now, we need to recalibrate for a new month of Fantasy Finance!
Before that, though, this leap day has some impact on investor behaviour. Firstly, employees paid by the hour usually end up better off than colleagues on monthly salaries, who effectively work for free because their contracts don’t reflect the leap day.
Companies might not save so much on fixed costs like this due to the weekend timing, but they may also make more money on variable usage-based services.
Electricity-provider EDF, gas-provider National Grid, and clean water-provider United Utilities will be helped by this leap year. Consumers pay for what they consume, to the very last unit. However, this door swings both ways.
On a leisurely Saturday, folks will let off steam with subscription services. Netflix, Spotify, and Blue Apron all stand to be left out of pocket by tomorrow. They’ll incur the costs of providing their services, but will go without revenue for a day, squeezing profitability and raising the risk of missing upcoming earnings targets.
Then there’s all the economic data that tomorrow puts out of whack. From dusk ‘til dawn, the global economy generates around 233-billion-dollars in real gross domestic product (GDP) growth. Some countries, like Britain, adjust their forecasts to account for the extra couple hundred. Other countries, like China, don’t bother.
This is what led to the Red Dragon missing estimated GDP growth in 2006, and markets plunging as a result. Stay on your toes, Invstrs, and pay heed to the 233-billion!