Much like the ancient Hebrews’ exodus out of Egypt, springtime
and the Passover holiday are often an excellent time of year to consider portfolio
maneuvers and repositioning as the “Best Six Months” of the year November-April
comes to a close. In years like 2022 when the “Best Six Months” are underperforming,
it is often an indication that the “Worst Six Months” AKA the “Sell in May”
period will also be weak.
Some may remember the old saying on the Street, “Buy Rosh
Hashanah, Sell Yom Kippur.” Though it had a good record at one time, it stopped
working in the middle of the last century. It still gets tossed around every
autumn when the “high holidays” are on the minds of traders as many take off to
observe the Jewish New Year and Day of Atonement.
The basis for the new pattern, “Sell Rosh Hashanah-Buy Yom
Kippur-Sell Passover,” is that with many traders and investors busy with
religious observance and family, positions are closed out and volume fades
creating a buying vacuum. Actual stats on the most observed Hebrew holidays
have been compiled in the table here.
We present the data back to 1971 and when the holiday falls
on a weekend the prior market close is used. It’s no coincidence that Rosh
Hashanah and Yom Kippur fall in September and/or October, two dangerous and
opportune months. We then took it a step further and calculated the return from
Yom Kippur to Passover, which conveniently occurs in March or April, right near
the end of our “Best Six Months” strategy.
Perhaps it’s Talmudic wisdom but, selling stocks before the
eight-day span of the high holidays has avoided many declines, especially
during uncertain times. While being long Yom Kippur to Passover has produced 63.6%
more advances, about half as many losses and average gains of 7.0%. From
Passover to Yom Kippur DJIA averages just 1.9% and is littered with nasty