Sell Rosh Hashanah, Buy Yom Kippur: What Does The Market Adage Look Like In 2021?

There are several old adages related to the markets. One that is commonly mentioned at this time of the year, just ahead of the Jewish holidays, is "Sell Rosh Hashanah, Buy Yom Kippur."

Historical Origin: The rule's origin is based on the concept that followers of the Jewish faith want to be free from material possessions during the most sacred period of the calendar year.

During the 10 days between the two major holidays, Jews reflect on their actions from the previous year and atone for their sins, while setting a new agenda for the upcoming year.

Upon completion of the cleansing process, they're free to return to the markets and evaluate investments for the upcoming year. Those who are ultra-religious may abstain from the markets altogether during this time.

Mixed Results Over The Years: In the wacky year of 2020, the exit date, or time to "sell," coincided with one of the quarterly quadruple witch expirations on Sept. 18, 2020. Based on the closing price of the S&P 500 cash index, investors would have exited the index that day (Rosh Hashanah commences at sundown) at a closing price of 3,319.47.

Over the next five sessions, the index did have a precipitous drop to 3,209.45, (for an overall 3.3% decline) by Sept. 24. However, if one refrained from "buying the dip" during the observant period, they would have had to reestablish the long position, at the conclusion of the holidays on Sept. 29.

Not only did the index sharply rebound off that low, but it was actually slightly higher than the exit level of 3,319.47. Based on the opening price on Sept. 29 (3,350.92), followers of this strategy had to reenter at just under a 1% premium to the price at sundown for the New Year.
With the index trading in the 4,500 handle at the time of this article being written, the reentry is looking pretty darn good.

See Also: 4 Ways Congress Could Move Markets In September

Strange Timing For The Holidays? In the 50 years of my observance of the Jewish holidays, they've never come so early in the month of September. The reason being the Jewish calendar, which has one additional month than the standard calendar, the holidays can take place anywhere from early September to late October with most being right in the middle.

As a result, this month's quadruple witch expiration (often a market-turning event) will take place on Sept. 17, which coincides with the end of the Jewish holidays.

'Sell' Has Been A Four-Letter Word: With respect to the S&P 500 index, there has never been a good time to "sell" over the past 17 months. The index has been on a massive win streak. The index has more than 50 new all-time highs this year, with four months remaining. As of Thursday, the index has been higher in nine of the last 11 sessions and posted a new intraday all-time high at 4,545.85.
On a weekly basis in 2021, the index has only had back-to-back down weeks two times, once in mid-April and the other being in late February/early March.

2021 Says, 'What Me Worry?' Up to this point, while the world is still dealing with a pandemic, the potential of rising interest rates due to inflationary pressures, multiple hurricanes and wildfires, tenuous relations with China, runaway debt increasing, wildly fluctuating jobs data, and investors total disregard for fundamental analysis has yet to shake investors out of the "buy the dip" mentality. Perhaps nothing will.

Therefore, one has to consider whether or not this is the year to "Sell Rosh Hashanah" and cautiously "Buy Yom Kippur," and keep some powder for an eventual correction. Of course, each investor is at a different juncture in their investment cycle, and what may be prudent for someone nearing retirement or a large capital outlay may not be for someone just starting to reach their peak earning/investment juncture in their life.