'Sell Rosh Hashanah, Buy Yom Kippur' Is A Tough Call In 2020

One old market adage commonly mentioned ahead of the Jewish holidays is "Sell Rosh Hashanah, Buy Yom Kippur." With the holidays commencing Friday at sundown, it's time for this year's investment interpretation of the adage from the perspective of this investor.

The 2020 version is much more difficult to analyze than in years past for a few different reasons.

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 period.

Mixed Results Over The Long-Term

No trading adage or strategy is 100% accurate over time. In 2019, following the original adage was a winning strategy.

Based on the closing price of the S&P 500 cash index, if investors had exited the market on the close of Sept. 30, 2019 — Rosh Hashanah commences at sundown — at a closing price of 2,976.74, they would have been able to reestablish their longs in the index at a lower price of 2,918.

During the period between Rosh Hashanah and the conclusion of Yom Kippur, the trading day after the second day of observance, the index declined nearly 2%, so investors following the adage true to form would have had to establish their long at the lower Oct. 10 opening price of 2,918.55.

Holding that long until Thursday’s closing price (3,357.01), would have yielded a 15% return if one was able to maintain it during the market correction.

Holding that long for the entire year, one would have to had stomach the COVID-19 crisis earlier in the year. Based on the index's current price (3,352), an investor would have a nearly 15% gain if one was able to maintain it during the market correction.

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