New research has provided a bit of empirical basis for a piece of old Wall Street lore: major Jewish holidays do affect stock markets.
According to Bespoke Investment Group, a New York provider of research and wealth management, the ten day stretch between the Jewish New Year, Rosh Hashanah, and the Day of Atonement, Yom Kippur, is a bad time for equities.
Mapping the performance of the S&P 500 for each of the periods from 2000-2012 the boutique firm found that the index averaged a decline of 1.43% during the period with positive returns in only five out of 13 years. The overall average change is -1.43%, although Bespoke Investment noted that the 18% decline in 2008 skews the results quite a bit. Looking at the median return instead the S&P 500 declines a more modest 0.5% during the period.
In a September 2012 newsletter, veteran UBS trader Art Cashin, described how he learned of the correlation 50 years ago at the start of his career.
“I was lucky enough to be hired by a small, bright, aggressive firm where I learned unique things from some wonderful people. I thought they hired me because I was sharp, inquisitive and hard working. Some of the older salesmen, instead, used to joke that I was the 'Shabbes Goy' - the only non-Jewish employee who could then man the phones on religious holidays. It was a joke (I think) but it gave an altar boy from Jersey City a chance to learn a little Yiddish and a touch of cultural traditions,” Cashin wrote.
“The way I learned it, you sell on Rosh Hashanah and buy back on Yom Kippur. The thesis, I was told, was that you wished to be free (as much as possible) of the distraction of worldly goods during a period of reflection and self-appraisal. Later as I studied market cycles and economic cycles, I was struck that the oft-repeated September/October weakness (crop cycle/money float) often corresponded to the Rosh Hashanah tradition. Is it cultural coincidence or cultural overlap? Who knows!”
Investors in other markets have noticed similar trends around other ethnic and national holidays. Markets in Greater China and elsewhere in East Asia, for instance, have been known to dip ahead of Chinese New Year as investors seek funds for festivities and hongbao (cash-filled red envelopes that are given as gifts).
Rosh Hashanah began at sundown Wednesday, 4 Sept, and Yom Kippur ends on 14 Sept. The S&P 500 rose 13.31 points, or 0.81%, on Wednesday and added three points, or 0.12 percent, on Thursday to finish at 1,656.
Are there any bits of market lore that you find may have a basis in reality? Share your stories in the comments.