This is not a coincidence
The better behavior of markets in the autumn and winter period can be explained by specific factors. There are “smaller” effects superimposed on the Halloween phenomenon. The speech includes: about the January effect resulting from tax optimization (shares are sold at the end of December and purchased at the beginning of the new year). The source of January’s increases may also be the funds’ willingness to remodel their portfolios and make purchases for the next year. It is worth noting that the January effect applies in particular to shares of small and medium-sized companies.
Earlier, at the end of December, the so-called windows dressing, i.e. increasing the value of assets at the end of settlement periods by funds. The turn of the year is also a time for company management boards to prepare financial plans and forecasts for the new year. The market discounts this, which results in an increase in quotations, and additional support is provided by recommendations updated by brokerage houses taking into account new (usually higher, because most companies try to improve their results from year to year) financial forecasts, which increases the valuation of shares in the discounted flow model. money.
These are just examples of arguments that can be used to rationally explain the Halloween effect. Regardless of them, a lot depends on the overall situation on the markets. If we have a bull market, most of the positive phenomena are reflected in valuations (thus becoming a self-fulfilling prophecy), while negative information is ignored. In the case of a bear market, we observe the opposite phenomenon.
What awaits the stock exchange?
Investors’ eyes are currently focused on the USA, where the presidential elections will be held on November 5. Polls show a close race. Economists and analysts try to predict how the victory of individual candidates may affect the markets. Interestingly, if we look more broadly, it turns out that for the stock exchange there is not much difference in who rules the country. In the long term, the economy is developing and the capitalization of companies is growing along with it. Data from eToro shows that the S&P 500 index increased during the terms of thirteen of the last fifteen US presidents. The exceptions are the terms of Nixon (-1%) and George W. Bush (-4%), who governed during economic crises.
Long-term data for the S&P 500 index published by bossa.pl confirm that rates of return are not evenly distributed. If we divided the calendar into twelve six-month periods, it is clear that the time from May to October is statistically the worst with an average rate of return of only 1.5%. April-September is not much better (2.5%). However, November-April is definitely the winner with 7%. foot. It is about 3 percentage points. higher than the average and median for the remaining 11 periods.
Stock indices in the United States and Europe (including DAX) have had very good years and are hovering around historical records. However, WIG compares poorly to other markets. Although valuations on the WSE are still relatively attractive, there are many opinions that it will be difficult to see growth at the end of the year. The analysis of the short sale register does not provide optimism. It contains a record number of over twenty items. This may indicate that foreign funds are betting on declines on the WSE. What awaits our market?
Is It Halloween or Just Market Trick-or-Treating?
So, it appears we’ve reached that delightful time of year again—the season of spooky stories, pumpkin spice lattes, and stocks behaving like they’ve had too many sweets at a Halloween party! A time when markets seem to get their act together and decide to play nice. All thanks to something we can broadly call the “Halloween phenomenon.” At least now we know what to blame for October’s market jig—sugar and taxes. But don’t fret; it’s not just little ghosts whispering stocks to behave; there are a few reasons behind this seasonal cheer.
The Magical January Effect
Interestingly, while we’re busy adorning our homes with cobwebs and jack-o’-lanterns, investors have one eye on the next big event in the financial world—January. Yes, that’s right, welcome to the land of tax optimization! Quite the tongue-twister—go on, say it five times fast after a glass of cider!
In December, you see, smart investors are like kids on a sugar rush, selling shares to minimize tax impacts and then racing back to the market on January 1st with their wallets wide open. It’s essentially a massive pre-New Year’s bash for stocks—complete with confetti investments flying everywhere!
Windows Dressing, No Drapes Required
As the year crawls to a close, fund managers embark on their lovely act of “window dressing.” It’s a fancy term for sprucing up their portfolios to impress their investors, kind of like putting on your best face for family gatherings. Basically, they’re buffing up those asset numbers before the big end-of-year powwow, leading up the stock market to share its festive cheer. Plus, forecasts are swapped out quicker than unfortunate Halloween costumes as analysts strive to chase those optimistic financial results whose only ghostly shadow is last year’s poor performance.
Time to Go Bullish, Or Bearish?
However, don’t let the seasonal enchantment get to your heads just yet—markets are notoriously fickle. In bull markets, it’s like being at a kid’s Halloween party with so many treats that bad news hardly gets a mention. In a bear market? Well, aren’t we just trendy and moody in our dark ensembles? Bad news is like the kid who got a rock instead of candy—all the attention for the wrong reasons!
What’s Brewing at the Stock Exchange?
And speaking of market theatrics, investors are glued to the screens again, this time keeping tabs on the U.S. presidential election on November 5th. Polls are looking tighter than a kid’s pants after Halloween, making it a nerve-racking affair. Economists and analysts are playing the guessing game about how the prospective winners might impact the markets. But let’s face it; history tells us it often won’t matter who sits in the big chair. The S&P 500 has swayed higher during most presidencies—thirteen out of the last fifteen, to be exact. But of course, Nixon and George W. Bush decided to throw a party of downturns, peaches and onions all around!
The Numbers Game
Now, here’s something worth pondering as we tangle with numbers, leave out the ghosts of returns past! Historical data suggests that from May to October might as well be labeled the “stumble zone” for our stock market friends—just a paltry 1.5% average return. Meanwhile, November to April steal the spotlight with an impressive 7%—dressing up nicely for the holiday festivities, and you get three extra percentage points just for believing!
But here’s the kicker—while U.S. indices are thriving like overindulged children at a candy store, the WIG (Warsaw Stock Exchange) isn’t exactly winning the costume contest, is it? It’s like being invited to a Halloween bash but finding yourself stuck with last year’s leftover candy. Investors are full of gloomy predictions that growth will be harder to come by than hiding from trick-or-treaters!
Concluding the Spooktacular Saga
To wrap it all up, remember friends, while the stock market can sometimes resemble a haunted house filled with surprises—some delightful, some terrifying—understanding these cyclical trends can really help avoid some market-related fright. So grab your pumpkin spice latte, pop some extra popcorn for the market show, and let’s hope it’ll be a thrilling and profitable season—for all the right reasons!
Ah, now that’s a cheeky way to deliver market commentary, blending market analytics with a touch of festive fun! Let’s hope investors navigate through the season with the deftness of a cat burglar! 🍬🏦
Certainly!
This text discusses the seasonal behaviors and phenomena observed in stock markets, particularly around the end of the year and leading into the new year. It highlights several key factors contributing to these market trends:
1. **Window Dressing**: At year-end, portfolio managers or fund managers often engage in “window dressing,” which involves adjusting their asset portfolios to make them look more attractive to investors before the year closes. This can lead to an increase in stock prices.
2. **Halloween Effect**: The text introduces the “Halloween effect,” where markets tend to perform better from November through April compared to the less favorable performance from May to October, suggesting a seasonal trading pattern.
3. **Impact of Presidential Elections**: Investors are currently focused on the upcoming U.S. presidential elections. Historical data reveals that, regardless of who is in office, the overall trend of the stock market tends to be upward over the long term, despite some exceptions during economic crises.
4. **Investor Behavior Around Year-End**: December is often a month where investors sell shares to optimize tax outcomes and subsequently reinvest in January, creating a noticeable surge in stock activity.
5. **Market Sentiment**: The text discusses how market sentiment can significantly alter the perception of news; good news is often amplified in bull markets, while bad news draws more attention in bear markets.
the text suggests that while there are various explanations for market movements, it is essential to consider the broader economic context and investor behavior as they navigate seasonal fluctuations and election-related uncertainties.
