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Can Stocks Enjoy Halloween Effect Despite Rising Rate Fear?
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It may sound like an irony, but the occasion of ghouls and ghosts can turn into an occasion of angels for Wall Street. Yes, it’s the Halloween Effect that normally lights up Wall Street. As you start carving the pumpkin, the gloom over Wall Street may pass away. Historically, investing in equities on All Hallow’s Eve — Oct 31 — leads to solid long-term returns. At least research shows that.
What is Halloween Effect?
Halloween Effect is a historically observed increase in stock prices from the month of November through the end of April. It is exactly opposite the popular adage "sell in May and then walk away,” which refers to the six months between May 1 and Oct 31. Vacations, the holiday buying season (both Christmas and spring) and seasonal optimism probably contribute to this optimism.
According to Forbes, a study conducted by Ben Jacobsen and Cherry Y. Zhang of Massey University in New Zealand shows that over a 300-year period, stocks habitually traded 4.52% better in the November through April period than in the summer months. According to their analysis of 65 developed and emerging markets, average stock-market returns for the six months following Halloween have been around 8.5% a year.
Against this backdrop, let’s take a look at a few sectors which might enjoy the Halloween Effect this time around. We have picked two top-ranked stocks from each of four winning sectors.
Oil prices remained in solid shape due to reduced supplies and ebbing U.S. recession fears. Saudi Arabia prolonged its voluntary one-million-barrel oil supply cut through to the end of the year. Russia too has vowed to cut oil exports by 300,000 barrels per day until the end of the year.
In addition, Israel’s war against Hamas has raised tensions in the Middle East, boosting oil prices in October. The conflict spreads to the rest of the Middle East region, as Iran – which is both a key oil producer and a supporter of Hamas – is involved in the picture.
Investors can thus bet on MLP companies like Hess Midstream Partners — which holds a Zacks Rank #1 (Strong Buy) — and TXO Partners LP — which has a Zacks Rank #2 (Buy). HESM owns, operates, develops and acquires a set of midstream assets to provide services to Hess and third-party crude oil and natural gas producers. TXO Partners focuses on the acquisition, development, optimization and exploitation of conventional oil and gas liquid reserves, principally in North America.
Construction – Sector Rank #3
The construction industry has displayed considerable resilience amid broader macroeconomic headwinds this year. Despite challenges in the U.S. economy, construction activity has continued to thrive, reinforced by various factors driving both residential and nonresidential construction spending. The nonresidential construction sector, especially, has seen steady improvement despite high inflation and interest rates.
Building Products stocks Martin Marietta Materials and Vulcan Materials,each with a Zacks Rank #2, are intriguing picks out here. Martin Marietta Materials produces and supplies construction aggregates and other heavy building materials, mainly cement, in the United States.Vulcan is engaged in the production, distribution and sale of construction aggregates in the United States and Mexico.
Medical – Sector Rank #4
The sector boasts a safe-haven status amid the market crisis. The tensions in the Middle East and the chances of another Fed rate hike this year have caused global markets to be volatile. Hence, medical/healthcare investing makes sense amid the current edgy market backdrop. Job growth in the sector remains decent.
Nursing Homes stock Zacks Rank #2 The Ensign Group and Outpatient and Home Healthcare stock Zacks Rank #1 Addus HomeCare can emerge as great picks here. Ensign Group Inc. provides healthcare services in the post-acute care continuum, urgent care center, and mobile ancillary businesses in the United States. Addus is a comprehensive provider of social and medical services at home.
Utilities – Sector Rank #5
This is another safe sector. Although higher rates are negative for the utilities sector, its sheer necessity in consumers’ lives have made it a winning one.
Water Supply utility stock Zacks Rank #2 California Water Service Group and Electric Power utility stock Zacks Rank #2 Brookfield Renewable Partners can thus be played. California Water Service Group is one of the largest water utilities in the United States, while Brookfield Renewable Partners owns and operates a renewable power platform.
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Can Stocks Enjoy Halloween Effect Despite Rising Rate Fear?
It may sound like an irony, but the occasion of ghouls and ghosts can turn into an occasion of angels for Wall Street. Yes, it’s the Halloween Effect that normally lights up Wall Street. As you start carving the pumpkin, the gloom over Wall Street may pass away. Historically, investing in equities on All Hallow’s Eve — Oct 31 — leads to solid long-term returns. At least research shows that.
What is Halloween Effect?
Halloween Effect is a historically observed increase in stock prices from the month of November through the end of April. It is exactly opposite the popular adage "sell in May and then walk away,” which refers to the six months between May 1 and Oct 31. Vacations, the holiday buying season (both Christmas and spring) and seasonal optimism probably contribute to this optimism.
According to Forbes, a study conducted by Ben Jacobsen and Cherry Y. Zhang of Massey University in New Zealand shows that over a 300-year period, stocks habitually traded 4.52% better in the November through April period than in the summer months. According to their analysis of 65 developed and emerging markets, average stock-market returns for the six months following Halloween have been around 8.5% a year.
Against this backdrop, let’s take a look at a few sectors which might enjoy the Halloween Effect this time around. We have picked two top-ranked stocks from each of four winning sectors.
These include MLPs like Hess Midstream Partners (HESM - Free Report) and TXO Partners LP (TXO - Free Report) , construction companies like Martin Marietta Materials (MLM - Free Report) and Vulcan Materials (VMC - Free Report) , utilities stocks like California Water Service Group (CWT - Free Report) and Brookfield Renewable Partners (BEP - Free Report) and healthcare stocks, includingEnsign Group (ENSG - Free Report) and Addus HomeCare (ADUS - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.
Energy – Sector Rank #1
Oil prices remained in solid shape due to reduced supplies and ebbing U.S. recession fears. Saudi Arabia prolonged its voluntary one-million-barrel oil supply cut through to the end of the year. Russia too has vowed to cut oil exports by 300,000 barrels per day until the end of the year.
In addition, Israel’s war against Hamas has raised tensions in the Middle East, boosting oil prices in October. The conflict spreads to the rest of the Middle East region, as Iran – which is both a key oil producer and a supporter of Hamas – is involved in the picture.
Investors can thus bet on MLP companies like Hess Midstream Partners — which holds a Zacks Rank #1 (Strong Buy) — and TXO Partners LP — which has a Zacks Rank #2 (Buy). HESM owns, operates, develops and acquires a set of midstream assets to provide services to Hess and third-party crude oil and natural gas producers. TXO Partners focuses on the acquisition, development, optimization and exploitation of conventional oil and gas liquid reserves, principally in North America.
Construction – Sector Rank #3
The construction industry has displayed considerable resilience amid broader macroeconomic headwinds this year. Despite challenges in the U.S. economy, construction activity has continued to thrive, reinforced by various factors driving both residential and nonresidential construction spending. The nonresidential construction sector, especially, has seen steady improvement despite high inflation and interest rates.
Building Products stocks Martin Marietta Materials and Vulcan Materials,each with a Zacks Rank #2, are intriguing picks out here. Martin Marietta Materials produces and supplies construction aggregates and other heavy building materials, mainly cement, in the United States.Vulcan is engaged in the production, distribution and sale of construction aggregates in the United States and Mexico.
Medical – Sector Rank #4
The sector boasts a safe-haven status amid the market crisis. The tensions in the Middle East and the chances of another Fed rate hike this year have caused global markets to be volatile. Hence, medical/healthcare investing makes sense amid the current edgy market backdrop. Job growth in the sector remains decent.
Nursing Homes stock Zacks Rank #2 The Ensign Group and Outpatient and Home Healthcare stock Zacks Rank #1 Addus HomeCare can emerge as great picks here. Ensign Group Inc. provides healthcare services in the post-acute care continuum, urgent care center, and mobile ancillary businesses in the United States. Addus is a comprehensive provider of social and medical services at home.
Utilities – Sector Rank #5
This is another safe sector. Although higher rates are negative for the utilities sector, its sheer necessity in consumers’ lives have made it a winning one.
Water Supply utility stock Zacks Rank #2 California Water Service Group and Electric Power utility stock Zacks Rank #2 Brookfield Renewable Partners can thus be played. California Water Service Group is one of the largest water utilities in the United States, while Brookfield Renewable Partners owns and operates a renewable power platform.