Impact of Labour Day on Stock Markets

Reviewed byDenise Noyan, co-founder and CEO of Wealt, profile picture
Published 1 May 2024
The impact of Labour Day on stock markets with workers people in the background

Labour Day, also known as International Workers’ Day, has more global significance than anticipated. It is a day coming back to remind us of the role of labour movements and their contributions to society's development. Although traditionally a day of leisure or respite for many, it impacts the stock markets and gives rise to varied investment techniques worth considering. We will look into the origins of Labour Day and its effect on financial markets.

The history of Labour Day

Labour Day has its roots in the labour union movement, particularly the eight-hour day movement, which advocated eight hours for work, eight hours for recreation, and eight hours for rest. The striking first parade occurred in New York City in 1882 and was organised by the Central Labor Union (CLU), a body representing 60 unions and over 80,000 people. More than 10,000 workers marched. This was the initiator point of a country-wide appreciation day for the workers in the United States.

Labour Day vs. May Day

Although Labour Day and May Day are often used interchangeably, they have different origins and significances. The United States and Canada celebrate Labour Day as a workers’ festival for their socioeconomic achievements, distinct from its protest-oriented nature. On the other hand, May Day has more solid connections to workers’ struggles and protests for their rights and better working conditions, which comes from the Haymarket affair. It happened in Chicago in 1886 when a bomb was thrown at the workers’ rally, causing a tragic clash between the police and the terrorists that left eight dead and subsequently impacted the labour movement in every corner of the world.

How does Labour Day affect stock markets?

Labour Day celebrations have economic effects, mainly manifested as the stock market’s closures during the holidays and symbolically reminding people of the importance of labour rights.

Market closures

Be it Europe or Asia, Labour Day is celebrated as a holiday in a wide range of countries, and the world's major stock markets are also closed on this particular day. Such a closure has an impact on both intraday trading volumes and market liquidity. Usually, trading activity is hampered for several days before and after the holiday arrangement. For example, commodity markets open even during public holidays like Labour Day in the U.S., which occurs in September. A typical scenario is usually a sharp fall in trade volumes, which puts more pressure on the stock prices due to lower liquidity.

Historical performance analysis

A pattern of historical data suggests that the stock market's reaction will have diverse impacts on Labour Day. During the holiday season, the markets sometimes slightly pick up the pace a day or two before the weekend, and this activity could be due to the investors getting into their positions or adjusting them in preparation for the holiday. Following the holidays after the trading close, markets may be affected by this massive backlog of unprocessed information and unfilled orders piled up over the holidays. This may lead to a rise in market volatility. However, it is worth noting that the influence tends to be very short-term, and the emerging trends in the market are stable and largely depend on broader international indicators and global happenings.

Significance and deep effect

Labour Day may seem like a brief pause in the busy financial world; however, its significance goes much deeper, demonstrating how socio-economic factors and workers' rights weigh on the financial markets. For investors, appreciating these impacts helps to create thoughtful investment strategies encompassing market cycles and possible breakdowns. As we commemorate the workers' efforts, we understand the interconnectedness of labour, economic policy, and financial markets that makes Labour Day a remarkable date in our financial calendar.

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