Sell Rosh Hashanah, Buy Yom Kippur? The Market Doesn't Make It Easy

One old market adage commonly mentioned just ahead of the Jewish holidays is “Sell Rosh Hashanah, Buy Yom Kippur.” 

With the holidays commencing on Wednesday at sundown, it is time for this year’s investment interpretation of the adage from this investor’s perspective.

Adhering to this seasonal pattern in 2023 would have rewarded an investor handsomely. Of course, it was not all smooth sailing, but the end result was outstanding. While expectations were high after the adage's performance in the 2022-2023 cycle, the results from the 2023-2024 cycle are even better.

 Keep in mind that this coincides with the strong performance of markets during the same time period. 

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, atone for their sins, and set a new agenda for the upcoming year.

Upon completing the cleansing process, they’re free to return to the markets and evaluate investments for the upcoming year. During this period, ultra-religious people may abstain from the markets altogether.

Mixed Results Over The Long-Term

No trading adage or strategy is 100% accurate over time.

In 2022, following the original adage was a winning strategy, and it has repeated that performance again this year in more of a rollercoaster fashion.  

Looking back at last year, the last day of trading before the holidays, Friday, Sept. 15 (a quadruple witch expiration), the S&P 500 cash index, tracked by the SPDR S&P 500 ETF Trust SPY, ended the session at 4450.32, marking investors exit. Upon returning to the markets at the conclusion of the holiday, Tuesday, Sept. 26, the opening print was fractionally higher at 4312.88, a decline of 137.44 points or 3%. 

Although it was a modest discount to the exit price on Rosh Hashanah, the major bottom did not come until Friday, Oct. 27, when it reached 4103.76.  That was another 169.75 points, or another 4% lower than the post-holiday entry. 

Investors who took the heat from the post-Yom Kippur entry in 2023 have been handsomely rewarded. The index ended Tuesday’s session at 5708.75, up 1395.87 points, or an astonishing 32.4% gain over the past year. While it fell 53.73 points, or 0.93%, at Monday's close, it is a big unknown how it will compare to Wednesday's closing price. 

That is the official mark from which prior results have been calculated. That being the last trading day prior to the holidays. 

As any investor knows, it is hard to buy the bottom and sell the top. But staying invested in the index over the long term has been rewarding. 

Sell Rosh Hashanah In 2024?  That is one tough question to answer.  For the time being, the Federal Reserve Bank has fended off inflation.  More importantly, it has begun to lower interest rates, which may be a boon to the economy, as well as many U.S. companies that benefit from lower borrowing costs. 

The question remains: Is inflation gone for good, or is the Federal Reserve acting now as it anticipates an impending recession, which many have been clamoring for over the last few years? The other positive scenario is that the economy already has had a "soft landing" and is now primed to expand even further, aided by the monetary easing. 

On a cautionary note, the geopolitical situation is horrendous, coupled with a very divisive election in November.  One thing the market does not like is uncertainty, but for the time being, the current situation is not unsettling to the markets.  

Finally, whether to "sell" your holdings mostly depends on your age and time frame. For younger investors, with years of investing ahead of them, short-term sell decisions are often not prudent.

On the other hand, if you have met your long-term investing objectives (retirement or similar), there could be no better time to ring the cash register than with the index at all-time highs. 

Buy Yom Kippur? A common investing mantra is to "sell the rip and buy the dip." No one knows how the index will perform over the next 10 days. However, if it is anywhere near its current level, it can hardly be classified as a "dip buying" opportunity.

In contrast to prior years, three pieces of key economic data will be released during the interim.  On Friday, the September jobs data will be released, followed by the Producer Price Index next Wednesday and the Consumer Price Index the following day.  However, the index has had a muted reaction to the last few months of data and barring a major surprise, the results will not alter the Federal Reserve Bank’s course of action. 

In addition, JPMorgan is set to kick off the third-quarter earnings season on Friday, Oct. 11, potentially offering an early glimpse into broader market trends.

Moving Forward

Following a down year in 2022, the index faced significant pressure until it hit a major low in October 2023. Since then, the S&P 500 has experienced a strong upward trend, even with recent market fluctuations.

Shortly after Tuesday’s opening, it appeared that the index was heading for yet another all-time high and closing high.  However, escalating tensions in the Middle East have prompted a sharp retreat in the index and raised volatility, which is not usually good.

Therefore, the first part of the adage, "Sell Roshanah," may be easier to execute than the second part, "Buy Yom Kippur."  As always, base your investment decisions on your long-term objectives and attempt to avoid emotional decisions made under extenuating circumstances.

Now Read:

• ‘Sell Rosh Hashanah, Buy Yom Kippur’ Strategy Made A Dramatic Return In 2023

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