What to Expect from the Financial Markets in March

“In like a lion, out like a lamb.”

The expression refers to the weather in March. But it also applies to the financial markets during the month that bridges the gap between winter and spring.

According to the Stock Trader’s Almanac, March historically begins bullishly before fading late in the month. Between 1950 and 2011, S&P 500 stocks have gained about 1.1% in March. But the Nasdaq doesn’t usually fare so well – especially in presidential election years.

The Nasdaq may be on the brink of breaching the 3,000 mark for the first time since before the tech bubble burst more than a decade ago. But history tells us that it may be due for an abrupt fall.

March is the worst month for Nasdaq stocks in presidential election years, with an average loss of 2.2%. Of course, the index is likely due for a fall anyway given that it is closing in on highs it hasn’t reached in more than 10 years. But it’s interesting to note that the tech-heavy index almost never does well in March when a presidential election hangs in the balance.

If the first two months of 2012 have taught us anything, however, it’s that we should throw the history books out the window. Stocks have risen steadily all year despite a widespread sovereign debt crisis in Europe, soaring oil prices and slow economic growth here in the U.S. Every time people have said the market’s ready to pull back, it rises higher still.

So the “in like a lion, out like a lamb” theory may not apply this year. S&P 500 stocks are up more than 9% over the first two months. The Dow is up more than 6%.

The whole year has been a lion. Or, more aptly, a bull.