Stocks: Sell Rosh Hashanah, Buy Yom Kippur?

This year has been terrible for seasonal strategies. Sell in May and Go Away? You would have missed out on a 6.5% return in the S&P 500. Avoid the stock market during a mid-term election year? You would have missed out on a 9.2% return. So much for seasonality.

Romina Hendlin

But with markets weakening ahead of Rosh Hashanah, the Jewish New Year, maybe it’s time to think about selling before the High Holiday. In a post from Sept. 7, the blog Humble Student of the Market explains why it’s taking that maxim seriously this year:

…the strategy of adopting the Wall Street adage of sell Rosh Hashanah, buy Yom Kippur may not be a bad idea. Bespoke showed the profitability of such a strategy in 2011. Though the sample size is relatively small, the strategy did show a negative bias in equity returns during such a period.

Even though I am not a big fan of seasonal trading strategies, my wild-eyed guess is that at least the “sell Rosh Hashanah” part (on Sep 24) of the strategy may be a decent bet this year. For the moment, I remain cautiously long the market.

Here’s a chart of the returns from sell on Rosh Hashanah/Buy on Yom Kippur going back to 2000, courtesy of Bespoke Investment Group: