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Halloween may be gone, but the Halloween Effect is probably about to take shape. The effect is basically a historically observed uptick in stock prices from the month of November through the end of April. It is exactly opposite to the popular adage "sell in May and then walk away” which refers to the six months between May 1 and October 31. It is a seasonal anomaly which is dissimilar to the buy-and-hold strategy, in which an investor has to go through down months.
According to Forbes, a study conducted by Ben Jacobsen and Cherry Y. Zhang of Massey University in New Zealand shows that over a 319-year period, stocks habitually traded 4.52% better in the November through April period than in the summer months. Over the past 50 years, the disparity in performance was more glaring at 6.25%. This trend holds true in 35 countries.
Holiday season buying and seasonal optimism may play a huge role in this surge. Some analysts even believe that a harsh winter keeps people inside with nothing left than analyzing stock trends.
Though the trend held well till the start of the global market crisis, but it started to lose afterward as global economic events, geopolitical risks, central banks and their diverging monetary policies actually started overpowering seasonality. Still, investors believing in seasonality, may take a look at these ETFs.
And this year, it should matter more as pay for seasonal and permanent workers is likely to see a jump this holiday season. This means that retail demand is building up. In fact, hiring labor for the holiday season has started one month earlier this year, as per the source. This gives cues of stable consumer sentiment thanks to moderate consumer price inflation, still-low gasoline prices and a tight labor market (read: Top ETF Stories of October).
Technology
As per Equity Clock, the tech sector enjoys seasonality in Q4. While the entire tech is well poisoned at this moment, some specific corners are soaring and especially deserve a look. Internet of Things is such a segment. Global X Internet of Things Thematic ETF (SNSR - Free Report) .
Via IoT, physical and the digital worlds can be connected. “IoT has enormous potential for data generation across the roughly 21 billion endpoints expected to be in use in 2020” and “by 2022, IoT will save consumers and businesses $1 trillion a year in maintenance, services and consumables,” as per Gartner (read: Invest in the Internet of Things with This ETF).
Russell 2000
With the U.S. economy gaining momentum, it is time for smaller caps stocks to prove their mettle. This is because the U.S. economy is gaining momentum and the greenback is rising. Smaller stocks are best reflected by the strength in the domestic economy and do not get perturbed by a stronger U.S. dollar due to lesser exposure in foreign lands.
Lest we forget, the Halloween Effect on Russell 2000 was a gain of 494% versus 373% offered by the S&P 500 from February 1993 through the end of 2010. Plus, small-cap securities have historically proven their outperformance in January. We landed up on the value spectrum of this capitalization or iShares Russell 2000 Value ETF (IWN - Free Report) as this year could prove a little volatile on presidential election, Fed hike speculation and nagging concerns in the oil patch.
Consumer Discretionary
Now who can forget consumer discretionary ETFs at this point of the year especially with all the merry-making events like Thanksgiving, Black Friday and Cyber Monday lined up? National Retail Federation estimated that Americans will likely spend a staggering $8.4 billion on Halloween. And “conventional wisdom is that strong Halloween spending is an indicator of strong Christmas season spending” as per an analyst.
Seasonality says banking stocks perform better from mid-November to May. And this year, operating backdrops are favorable for banking stocks with a bullish Q3 earnings season and rising rates. PowerShares KBW Bank ETF (KBWB - Free Report) can thus be taken a look at (read: ETFs to Play 3 Affordable Sectors).
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Can Halloween Effect be True to These ETFs?
Halloween may be gone, but the Halloween Effect is probably about to take shape. The effect is basically a historically observed uptick in stock prices from the month of November through the end of April. It is exactly opposite to the popular adage "sell in May and then walk away” which refers to the six months between May 1 and October 31. It is a seasonal anomaly which is dissimilar to the buy-and-hold strategy, in which an investor has to go through down months.
According to Forbes, a study conducted by Ben Jacobsen and Cherry Y. Zhang of Massey University in New Zealand shows that over a 319-year period, stocks habitually traded 4.52% better in the November through April period than in the summer months. Over the past 50 years, the disparity in performance was more glaring at 6.25%. This trend holds true in 35 countries.
Holiday season buying and seasonal optimism may play a huge role in this surge. Some analysts even believe that a harsh winter keeps people inside with nothing left than analyzing stock trends.
Though the trend held well till the start of the global market crisis, but it started to lose afterward as global economic events, geopolitical risks, central banks and their diverging monetary policies actually started overpowering seasonality. Still, investors believing in seasonality, may take a look at these ETFs.
And this year, it should matter more as pay for seasonal and permanent workers is likely to see a jump this holiday season. This means that retail demand is building up. In fact, hiring labor for the holiday season has started one month earlier this year, as per the source. This gives cues of stable consumer sentiment thanks to moderate consumer price inflation, still-low gasoline prices and a tight labor market (read: Top ETF Stories of October).
Technology
As per Equity Clock, the tech sector enjoys seasonality in Q4. While the entire tech is well poisoned at this moment, some specific corners are soaring and especially deserve a look. Internet of Things is such a segment. Global X Internet of Things Thematic ETF (SNSR - Free Report) .
Via IoT, physical and the digital worlds can be connected. “IoT has enormous potential for data generation across the roughly 21 billion endpoints expected to be in use in 2020” and “by 2022, IoT will save consumers and businesses $1 trillion a year in maintenance, services and consumables,” as per Gartner (read: Invest in the Internet of Things with This ETF).
Russell 2000
With the U.S. economy gaining momentum, it is time for smaller caps stocks to prove their mettle. This is because the U.S. economy is gaining momentum and the greenback is rising. Smaller stocks are best reflected by the strength in the domestic economy and do not get perturbed by a stronger U.S. dollar due to lesser exposure in foreign lands.
Lest we forget, the Halloween Effect on Russell 2000 was a gain of 494% versus 373% offered by the S&P 500 from February 1993 through the end of 2010. Plus, small-cap securities have historically proven their outperformance in January. We landed up on the value spectrum of this capitalization or iShares Russell 2000 Value ETF (IWN - Free Report) as this year could prove a little volatile on presidential election, Fed hike speculation and nagging concerns in the oil patch.
Consumer Discretionary
Now who can forget consumer discretionary ETFs at this point of the year especially with all the merry-making events like Thanksgiving, Black Friday and Cyber Monday lined up? National Retail Federation estimated that Americans will likely spend a staggering $8.4 billion on Halloween. And “conventional wisdom is that strong Halloween spending is an indicator of strong Christmas season spending” as per an analyst.
Our choice is Amplify Online Retail ETF (IBUY - Free Report) given the forecast of an 11% jump in e-commerce sales this holiday season (read: 4 ETFs & Stocks to Treat You on Halloween and After).
Banks
Seasonality says banking stocks perform better from mid-November to May. And this year, operating backdrops are favorable for banking stocks with a bullish Q3 earnings season and rising rates. PowerShares KBW Bank ETF (KBWB - Free Report) can thus be taken a look at (read: ETFs to Play 3 Affordable Sectors).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>