Time To Trade On The Stock Market Halloween Effect

By: Regent_Markets

With Halloween just around the corner, investors are entering what has persistently been a highly profitable period for world stock markets. Investment returns on the benchmark S&P 500 have been roughly three times higher in the period between November and April compared to the summer months of May to October.

This effect is no flash in the pan either. A recent study by Jacobsen and Zhang found that the effect was robust going back to 1696 and positive in 81 of the 108 countries that had records for.

Spooky returns from the Halloween effect
Looking at the S&P 500 stock market from 1950, we can break down the exact nature of the Halloween effect. Is the positive impact due to having big gains, or is it because they are consistently positive? The answer is both!

Average monthly gain on the S&P 500 since 1950

You can see the sea of red for the period between May and September, representing below average returns. The Halloween effect also includes the two months that have historically been the best for world stock markets – November and December.

Average monthly strike rate on the S&P 500 since 1950

Now week can see that the Halloween effect isn’t just about having a few big months, the Winter months have been consistently positive more often than not. December in particular has an incredible record of being positive 75% of the time going back to 1950.

Bet On The Halloween Effect
Fixed Odds trading is a great way to play the Halloween effect as your risk is always limited to your initial stake. This means you can sit back and let the Halloween effect play out rather than worry about stop losses.
At the time of writing, the S&P 500 is around 1426 and taking the average gains from November and December, we might expect the market to close the year above the 1450 region.

A HIGHER trade predicting that the S&P 500 closes on December 31st at 1450 could return 179%, or £64 profit for every £35.50 put at risk.

Of course, the Halloween effect is not guaranteed to take hold every year, but with a high strike rate in these months, balanced against a healthy potential gain, the odds are in your favour.

Dave Evans
Email: editor@my.regentmarkets.com
Url: www.BetOnMarkets.com

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Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

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