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Investors are worried about Covid-19 again. Rising infection rates have left stocks far in the red, with a loss of more than 2% for the
Dow Jones Industrial Average.
But Covid fears—and infection rates—have been rising for weeks. Stocks have, for the most part, brushed them off. The question for investors is what is different now?
The answer might not be as fundamentally driven as investors might expect. Today is a Monday, and Mondays are lousy for stocks.
Black Monday was, well, a Monday. That was Oct. 19, 1987, when the Dow dropped almost 23% in its worst one-day decline on record.
Oct. 28, 1929, when the Dow dropped more than 14% was also a Monday. So was Dec. 1, 2008, when the 2008-2009 financial crisis left the Dow with a loss of 7.7%. And the Dow dropped 13% on Monday, March 16, 2020, because of Covid-19.
The four worst days in the Dow’s history were all Monday’s, as were 13 of the 25 ugliest. Thirteen of 25 is more than half—a lot considering that Monday represents about 20% of all trading days.
More About Today’s Selloff
Why Monday’s are so awful is up for debate. One factor could be that over the course of a weekend, investors have a couple of days to reflect on broader trends in the market. Perhaps that gives people the time they need to make the call that they ought to sell. A weekend with the market closed is also more time for potentially negative news to develop.
Whatever the reason, Mondays are more volatile than other days. The average price change on a Monday is about 20% greater, up or down, than during the rest of the week. Still, only about 20% of the market’s best days are Mondays, so while the first trading day of the week gets only its fair share of the good days, it gets way more of the bad ones.
This means investors should take a Monday selloff with a grain of salt. The trends causing stocks to fall may be real, but they can be exacerbated by nothing more than the day of the week.
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