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Wall Street’s Trick or Treat

Mark Hulbert, Special for USA TODAY 11:02 a.m. EDT October 13, 2016

Wall Street wants you back!

If you were one of those investors who this past spring “sold in May and went away,” you should know that the seasonal winds will soon shift and begin blowing in a bullish direction.

I’m referring, of course, to the well-known six-month-on, six-month-off seasonal pattern that goes by the name of the “Halloween Indicator.” Followers also refer to it as “Sell in May and Go Away.” In contrast to most of the alleged patterns that Wall Street claims to have discovered, this one turns out to be based on solid statistics. The stock market historically has produced the bulk of its gains in the “winter” months between Halloween and May Day.

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Since the Dow Jones industrial average was created in 1896, for example, it has produced an average winter gain of 5.2%, versus just 1.7% during the summer. Not only is this difference significant at the 95% confidence level that statisticians often use to determine if a pattern is more than just a random fluke, it is not unique just to the U.S. Ben Jacobsen, a finance professor at the TIAS Business School in the Netherlands, has detected the Halloween Indicator in almost all foreign countries’ stock markets as well, and as far back as 1694 in the United Kingdom’s market.
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