This is the influence a leap year has on the stock market

• Leap year usually every four years
• Impact on economy depends on number of working days
• Influence on stock markets rather marginal

The leap year is a special feature of the Gregorian calendar in which a year is extended by one day instead of the usual 365 days. The reason for this is the fact that it takes around 365.24 days for the Earth to travel completely around the sun, i.e. 365 days and a “quarter of a day”. In order to take this quarter day into account in the calendar and so that the seasons always fall within approximately the same period, an additional day is added to the calendar year every four years. This extra day in a leap year is February 29th.

Most people are probably familiar with the fact that the leap year occurs every four years. However, there are a few additional rules that determine whether a year is a leap year or not. A rule states that a year is a leap year if it is divisible by four without a remainder. However, there is an exception here. If a year is divisible by four and by 100 without leaving a remainder, it is not a leap year. This will be the case, for example, in 2100 or 2200. But that’s not all, because there is also an exception to this exception: If a year can be divided by 400 without a remainder, it is again a leap year, even if it can also be divided by 100. This was the case, for example, in the year 2000 and will also apply to the year 2400, for example.

This is how the leap year affects the economy

How does the leap year affect the economy and stock markets, if there are any effects at all? A leap year can have a positive impact on economic performance. Finally, an extra day is added to the year on which you can work, consume or even advertise. However, it depends on which day of the week February 29th falls on.

For example, although the year 2024 is a leap year, according to the Federal Statistical Office there are fewer working days on average than in the previous year. Whether a leap year can have a positive effect on economic performance depends primarily on whether there are actually more working days than in the previous year. This is how ifo Institute expert Timo Wollmershäuser summarizes it to “Capital”: “As a rule of thumb you can say: If the number of working days increases by one percent compared to the previous year, GDP growth falls by almost a quarter of a percentage point higher due to this calendar effect out of.”

According to Capital, Commerzbank chief economist Jörg Krämer adds that a country’s GDP could theoretically increase by 0.25 to 0.4 percentage points in a leap year. However, there are also differences between the various sectors: “But in sectors such as energy production or restaurants, work is carried out on all calendar days, so the additional working day is less significant in percentage terms.”

This is how the leap year can affect the stock markets

What is the leap year effect on the stock markets? Matt Weller of FOREX.com and City Index tells CNN Business that there is a small but noticeable effect on the bond market and on corporate results. The interest on bonds is calculated based on the days of the year, so in a leap year there is an additional interest day. According to Weller, this makes only a very small difference, but in interest rate-sensitive markets it could have an impact on the pricing of bonds. The impact on company results is comparable to that on the economy in general. According to Weller, there is simply one more day available to contribute to the fiscal quarter.

If you look at history, there are a few other trends that emerge in leap years. As CNN Business calculated using data from S&P Dow Jones Indices, the market-wide US index S&P 500 gained an average of 10.8 percent in leap years between 1971 and 2023. During the other years, however, there was an average increase of 12.8 percent. On February 29th, it had fallen by an average of 0.1 percent since 1928.

Another trend is that leap years often fall on years in which US presidential elections take place, such as 2024. According to Yardeni Research, the uncertainty before such elections can weigh on the stock markets, on the other hand, the markets would have in election years In the past, it has usually developed positively because in such years the political parties would usually focus on strengthening the economy and the stock markets in order to win over more voters, as CNN Business writes. The leap year can definitely have an influence on the stock markets and the economy, but what exactly this looks like depends on the individual case.

Editorial team finanzen.net