Hocus Pocus, Market Focus

Halloween marks more than just spooky celebrations: it typically kicks off a seasonally strong period for stock markets known as the “Halloween Effect.” This phenomenon suggests stocks perform better between Halloween and May 1 compared to the summer months, giving rise to the “sell in May and go away” strategy.

The idea can be traced back to 16th-century London, when wealthy investors retreated to their country estates in summer leaving their portfolios largely unattended. Today, a similar seasonal trend seems to echo on Wall Street as investors take summer vacations and, historically, volumes slip as they shift funds to less risky slower growth assets.

Skeptics, especially those who believe in the efficient markets hypothesis, question the Halloween Effect’s validity, arguing any profitable strategy would have been arbitraged away by now. Yet the Halloween Effect persists appearing not just in the US but in markets from London to Tokyo.

Adding to the spell that’s cast on Hallow’s Eve, recent US economic indicators reveal resilient growth with a 2.8% rise in third-quarter GDP. Consumers are spending, and inflation is cooling even as companies report mixed earnings. While the markets Hocus Pocus, Market Focus shrugged at the data, there’s no denying the underlying economic strength of the US economy. With the elections just days away, here’s hoping this season’s spell casts a favorable glow as spooky season gives way to holiday cheer.