The TGIF Effect

A few years ago, standard five-day workweek traditionalists were aghast when Forbes magazine published an article titled “Why Every Weekend Should Be A Three Day Weekend“. Based on data that we’ve been tracking for the last several years, Wall Street bulls appear to agree. Take a look at the following data which we updated from a 2014 presentation made to a Chicago-based hedge fund and covered in a recent blog. The table shows the simple sum of the gains for the S&P 500 on each day of the week:

Come Thursday afternoon, clearly Wall Street traders have their minds set (and Model Xs loaded up) for their weekend at the Hamptons. Maybe they’re thinking “I’m up so much already this week, let’s take the profits and head to the beach” or “the week is already down so much, I don’t want to lose anymore”. It’s also possible they simply don’t want to hold the risk over the weekend in fear of some market-crashing headline.

We were able to code this dynamic into our Adagio strategy last weekend and implement it on Thursday, liquidating our QQQ position just before the market close and avoiding the 2% decline in the Nasdaq on Friday. Our computer work showed that it was best to buy back on Friday close, so we did. The impact over the 10-year study was to improve the overall returns by 3%, reduce the drawdown by 50%, and reduce the exposure by 14%.

The table below summarizes our YTD results for 2021:

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