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By Arin Ruttenberg*
There are many investment strategies one can employ, but only one that is as spooky as the mystery around it implies, namely the ‘Halloween effect.’
It tells investors to exit stocks on the 1st of May and return to the market on the 31st of October (Halloween.) The strategy says that one would need to move into other asset classes during May to end of October until buying back into stocks. It’s closely related to the age old saying ‘’ Sell in May, go away, come again St. Leger Day.’’
So far in 2022 the first part of the strategy has worked as leaving the market in May would have avoided around 10% decline in stocks in 2022.
The biggest mystery of all is that we don’t know why it works. There are many theories from taxation to the weather, to high profile wall street execs going to the Hamptons for holiday, but it is hard to know conclusively what’s driving the effect. Professors Cherry Zhang and Ben Jacobsen published a paper in the American Economic Review that specifically studied the performance of stocks during the period from November to April and called it ‘The Halloween Indicator.’ They studied the trend extensively and find it to have strong support over longer time periods and across countries. On average, stock markets have historically returned materially more during the November-April period than May-October and when I say long period of time, the success rate is 80% over 5 years and 90% over 10 years suggesting that it may certainly fail in any given year but can add around 4% to performance compared to the buy and hold strategy.
The graph below depicts the Halloween effect for the S&P500 for the periods 1970–2017 and 1991–2017. It indicates that the return on the S&P 500 Index is much higher from November through April than it is from May through October:
This strategy certainly can work in 2023 with the US entering a midterm year, which has been positive for the U.S. stock market historically so there are two indicators suggesting U.S. stocks may be set for a reasonable run over the coming months.
Challenges
The challenges according to Jacobsen are tough. As mentioned above, it doesn’t work each year, in fact, the chances of this working in a given year are surprisingly close to 50/50 but the returns in good years can be sufficiently strong, that the average return is quite impressive even if you can be sure to come out ahead every year.
For me other challenges are tax – should one be constantly trading in and out of the markets this could trigger income tax, a far less attractive tax, and which ‘’other asset classes’’ should we be investing in? So far from 1 May 2022 to date, the answer would be USD cash, but the opportunity cost of not holding some of the energy sector, even as a tactical play, would have been 18% in USD terms. In future, this could be anything from tech to property.
With a coin toss each year, I’m personally happy to leave this Halloween mystery unsolved and stick with the boring old strategy that has worked best in my life which is dollar cost averaging and holding on to a globally diversified set of asset classes, mainly shares, that include a satellite such as Crypto. This may be boring but boring can be beautiful when it comes to figuring out how things will play out during a bear market.
- Arin Ruttenberg is an advisor at Brenthurst Sandton
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
