Spooky Stock Strategies: How the Halloween Effect Moves Markets

Key Takeaways

• The Halloween Effect is a market timing theory based on historical stock market trends.
• This trend has positively impacted the tech stock in New York over the last 10 years.
• Nvidia and MicroStrategy recorded some of the best performances during this timeframe.

The stock market occasionally reveals intriguing patterns that challenge conventional wisdom. One such phenomenon is the “Halloween Strategy,” a market timing approach that suggests investors can capitalize on seasonal trends.

As the Halloween season commences, investors assess potential investment opportunities across the market, including the tech sector.

What’s The Halloween Effect?

The Halloween Effect is a market timing approach that suggests stocks tend to perform better from Oct. 31 – Halloween day – through May 1 than during the summer months.

According to this strategy, investors buy stocks in November, hold them through the winter, and then sell in April, shifting their investments to other asset classes from May through October.

This strategy has been discussed for over a century , with variations appearing in financial literature despite the lack of a clear explanation for its effectiveness. Evidence suggests it has yielded strong returns over time, making it an intriguing market anomaly.

At its core, the Halloween strategy contrasts with the traditional buy-and-hold philosophy, which encourages investors to maintain consistent exposure to the market regardless of short-term fluctuations.

Instead, the Halloween strategy embodies the saying “Sell in May and go away,” which encapsulates the notion of exiting the stock market during summer.

This concept has been expressed in various forms over the centuries, often highlighting the end of the English social season in mid-September as a time to return to the market.

The origins of the Halloween strategy can be traced back to the U.K., where wealthy individuals would retreat to their country estates during the summer, mainly ignoring their investment portfolios until fall.

Tech Index Performance

The Nasdaq 100—the index that reflects the tech sector’s performance—has generally shown strong returns from Oct. 31 to May 1 over the last ten years, aligning well with the Halloween strategy. Historically, this period favors stocks, particularly in sectors represented in the Nasdaq 100, which is heavily weighted toward technology and growth companies.

From 2013 to 2022, the Nasdaq 100 has consistently delivered impressive gains. For instance, from Oct. 31, 2019, to May 1, 2020, the index saw a remarkable increase of approximately 23%. Similarly, in the subsequent year, the index gained around 27% during this same six-month period. In contrast, the periods from May to October often reflect weaker performance.

Last year, ​the index started on October 31, 2023, at 12,000 points, and ended on May 1, 2024, at around 14,000, showing a notable increase over this period. The jump in stocks like Nvidia boosted the performance of the wider index, which recorded double-digit growth over this timeframe.

Performance Over the Last Decade

Best Performing Tech Stocks

Nvidia experienced remarkable growth from Oct. 31, 2023, to May 1, 2024, soaring approximately 66% from $38 to $100 per share. This surge was primarily due to robust sales in gaming and data center segments, alongside the increasing adoption of artificial intelligence (AI) technologies.

Meta also outperformed the broader market during this period, rising from $340 to $470 per share. Factors such as the growth of its social media platforms and increased focus on emerging technologies like the metaverse boosted this positive trend.

Amazon demonstrated steady growth, starting at $121 and closing at $185 on May 1, 2024. This performance aligns with the company’s continued e-commerce and cloud computing services dominance.

Not on the Nasdaq but still a tech company, Exodus Movement, Inc. has seen an impressive total return of 479%. MicroStrategy boasted a 363% return. Other notable mentions are Zeta Global Holdings, with a 287% return.