Sell Rosh Hashanah, Buy Yom Kippur: An Investor's Guide

   

The Jewish Influence on Wall Street

Wall Street is a diverse ecosystem, and individuals from various backgrounds have played crucial roles in its success. That said, Jewish individuals have played prominent roles in the history and development of Wall Street.

Just a few of the well-known figures include Larry Fink (founder of BlackRock), George Soros (founder of Quantum Fund), Bill Ackman (founder of Pershing Square), Michael Bloomberg (founder of Bloomberg), Stephen Schwarzman (founder of Blackstone), Henry Kravis (founder of KKR), Michael Milken (the “junk bond king”), Jim Simons (the “quant king”), and Marcus Goldman & Samuel Sachs (co-founders of Goldman Sachs), and the list goes on.

Historically, Jewish people found success in lending, a profession that was less respected due to religious persecution and discrimination in Europe. When Jewish immigrants came to the U.S., they faced similar discrimination, making it difficult to find good jobs, so many turned to the relatively open financial sector back then. Over time, they built powerful networks and contributed to shaping the modern Wall Street that we know today.

There are specific days when many of these influential Jewish figures step away from the financial market. During this time, trading volume decreases, volatility increases, and this often leads to a decline in stock prices. This highlights just how significant the influence of Jewish people is on Wall Street. While you don't need to know every detail about Jewish holidays, it's important to be aware of those that can impact the stock market and when they occur.

Rosh Hashanah

Rosh Hashanah is the Jewish New Year, also known as the "Festival of Trumpets" (named for the trumpet blown to signal repentance). It is a two-day holiday during which Jews rest and offer prayers of repentance for ten days.

Because the Jewish calendar is based on the Hebrew calendar, which differs from the Gregorian calendar that most of us use, the date of Rosh Hashanah changes each year. However, it usually falls between September 5 and October 5 on the Gregorian calendar.

In 2024, Rosh Hashanah was observed from October 2 to 4. While it appears to span three days, it is considered two days because it starts on the evening of the first day and ends on the evening of the third day, making it roughly two full days.

Yom Kippur

Yom Kippur, also known as the Day of Atonement, is a day of fasting and repentance for one's sins. It takes place nine days after the first day of Rosh Hashanah and lasts for one day. Similarly, the date of Yom Kippur changes each year on the Gregorian calendar, typically occurring between September 14 and October 14.

In 2024, Yom Kippur was observed from October 11 to 12. Though it seems to cover two days, it is considered one day because it begins at sunset on the first day and ends at sunset the next day, lasting about 25 hours in total.

Sell Rosh Hashanah, Buy Yom Kippur!

During the ten days from Rosh Hashanah to Yom Kippur, Jews reflect on the past year, atone for their sins, pray, and abstain from material pursuits according to their traditions. The most material of all things is money. This is why trading volume in the stock market tends to decrease during this period. Since Rosh Hashanah is the first day of the Jewish New Year, some might choose to close certain stock positions in preparation for the year-end.

Once this period ends, the stock market typically regains momentum. Hence the saying, "Sell Rosh Hashanah, Buy Yom Kippur." If Rosh Hashanah falls close to the "quadruple witching" day, which is the third Friday of September, the market can experience even more volatility. Another Jewish holiday, Sukkot, which also falls in September or October, is another period to watch closely.

Reality Check: A Five-and-a-Half-Year Review

The "Sell Rosh Hashanah, Buy Yom Kippur" strategy isn't as well-known as "Sell in May and Go Away," but it’s popular enough that several studies have examined it. The conclusions of these studies vary, ranging from finding statistically significant increases in volatility during this period to showing that this strategy does not lead to statistically meaningful returns.

So, we calculated the results using the S&P 500 index over the past five and a half years, from 2019 to 2024. We refer to it as five and a half years because, for this year (2024), we have the results for selling on Rosh Hashanah but will need to wait one more month for the outcome of buying on Yom Kippur. However, we're concerned that the outcome of “Buy Yom Kippur” this year may be distorted due to the heightened volatility typically associated with the Presidential election (scheduled on Nov 5, 2024), which is why I'm posting this article now without waiting for that result.

We reviewed only the latest five and a half years because this isn’t an academic paper, even academic studies on this topic reach different conclusions, and we believe recent trends are more important. Ultimately, everyone has to make their own judgment. Now, let's take a look at the performance!

(1) Actual Performance: 2019

• The benchmark for selling is the closing price on the prior day of Rosh Hashanah and for buying is the closing price on the first day of Yom Kippur. If there's a holiday, the transaction occurs on the previous day.

In 2019, "Sell Rosh Hashanah" strategy helped avoid a -2.3% loss until Yom Kippur. After buying back on Yom Kippur, the S&P 500 rose 3.6% in two weeks and 6.9% over the month, achieving the dual benefit of avoiding losses and maximizing gains.

(2) Actual Performance: 2020

In 2020, "Sell Rosh Hashanah" strategy allowed you to avoid a -1.7% loss. Moreover, the S&P 500, after being bought back on Yom Kippur, jumped 5.4% in two weeks (with a similar 5.1% gain over the month). This time, the strategy worked effectively. Of course, in 2020, the market surged due to stimulus measures and relief payments related to the COVID-19 crisis, but the rally that started in late March experienced correction in September.

(3) Actual Performance: 2021

In 2021, "Sell Rosh Hashanah" strategy helped avoid a 1.2% loss. However, after buying back on Yom Kippur, the index fell by -2.7% over two weeks and -0.2% over the month, "Buy Yom Kippur" strategy didn’t perform well.

(4) Actual Performance: 2022

In 2022, following "Sell Rosh Hashanah" strategy would have meant missing out on a 2.6% rise in the S&P 500. After buying back on Yom Kippur, the index dropped -1.9% over two weeks and -0.5% over the month, again producing lackluster results. So both sides of strategy didn't work well.

(5) Actual Performance: 2023

If you had sold the S&P 500 at the closing price on the prior day of Rosh Hashanah in 2023 and bought it back at the closing price on the first day of Yom Kippur, you would have avoided a 4.1% drop in the index. However, after buying back, the index returned -0.3% over the next two weeks and -2.2% over the next month.

(6) Actual Performance: 2024

If you had followed "Sell Rosh Hashanah" strategy in 2024, you would have missed a 1.9% rise in the S&P 500. We will need to wait one more month for the outcome of "Buy Yom Kippur" strategy. But as mentioned above, it may be distorted due to the normally high volatility toward the Presidential election day. So, we don't wait for the result for this analysis.

(7) Actual Performance: Averages

Based on observations of the S&P 500 index from 2019 to 2024, during the Rosh Hashanah to Yom Kippur period, the index fell an average of -0.8%. Over those six years, it declined four times and rose only twice.

In contrast, during the month following Yom Kippur, the index rose by an average of 1.8% (over five years excluding 2024). While the market declined three times and rose twice during this period, the large gains in 2019 and 2020 brought the average up to a positive 1.8%.

Concluding Remarks

Here are some concluding thoughts about the "Sell Rosh Hashanah, Buy Yom Kippur" strategy:

• The logic behind it appears to make sense.
• It is well-known enough to have been written about in many articles and studies, which means the awareness itself might influence market behavior to some extent.
• This period often overlaps with September, a historically volatile month due to various factors.
• Over the past six years, the strategy has generally  proven effective, making it worth considering. When looking at probabilities, selling on Rosh Hashanah has  demonstrated greater reliability than buying back on Yom Kippur.

Thanks for reading. I wish you success in making smart investments!

This blog does not offer investment, financial, or advisory services. The information provided herein is for general informational purposes only and should not be interpreted as advice for making specific investment decisions. All investments involve risk, and past performance is not indicative of future results. It is advisable to consult with a qualified financial advisor to determine strategies or products that are appropriate for your individual circumstances. The owner, writer, or operator of this blog accepts no responsibility for any direct or indirect losses that may arise from the use of or reliance on the content presented. The information provided on this blog is subject to change and may not be current. The content is based on personal opinions, as well as information from news sources and research, and may vary due to shifts in personal opinions, financial market conditions, or other influencing factors. Most data referenced is derived from daily closing prices. Data finding, sorting, graphing, and analysis are performed primarily by myself, and while efforts are made to ensure accuracy, errors may be present. If you identify any inaccuracies, please inform me via comments or email, and I will endeavor to review and correct them as necessary. External content or images will be cited to the best of my ability.