Leap
Every fourth year has an extra day to sync our calendars with the Earth’s orbits around the Sun – but this can also have an economic impact across the globe.
Implemented to make up for the fact our planet takes about 365.2422 days to circle the Sun, February 29 brings a playful twist to the calendar and unique experiences for those celebrating milestones on that date.
Superstitions abound throughout a leap year. It’s an omen of a bad harvest in Germany and Scotland; women supposedly propose more in the British Isles; and Greek couples who tie the knot on 29/2 are apparently doomed for divorce.
On a more rational level, though, you might expect the extra day to add 0.27% to the world’s GDP, since that’s roughly the contribution per day. Does it?
The empirical answer is fairly complicated, as most countries follow IMF recommendations to perform a seasonal adjustment to account for these events. Australia is one of the few that don’t, and in 2020 – the last leap year – the economy is believed to have had a A$5.2b boost, courtesy of February 29. Considering the year’s A$1.98 trillion output, that’d be a 0.26% increase. Pretty spot on.
A higher GDP should signal a stronger economy and look good for the stock market, right? It’s not that simple, but for what it’s worth, only two of the 16 leap years since 1957, when the S&P 500 was created, have been down years for the index: 2000 (dot-com bubble) and 2008 (GFC). However, that’s nowhere near enough data to conclude with any statistical significance that leap years are good for stocks.
As for the impact on specific companies, Delta Air Lines ($DAL), Chipotle ($CMG), O’Reilly ($ORLY) and Equity Lifestyle Properties ($$ELS) have mentioned in their earnings calls they expect some tailwinds due to the additional business day this year. That’s not common in the scheme of things. In 2020, for instance, only 12 of all S&P 500 companies stated they believed earnings could be affected by the leap year.
The most important event for investors every leap year is not the last day of February, but the U.S. presidential election. The change of leadership in the world’s biggest economy unquestionably draws the attention of the markets. In 2024, however, one investment could outperform the rest: 1996 calendars. The weekdays line up perfectly with this year’s, so people are rushing to snag themselves an old calendar that satisfies their 90s nostalgia and can actually be used. If you’ve been hoarding any, you might be able to cash in on the craze going on in both China and the U.S.
