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During a recent “lightning round” interview, I was asked about the best piece of business advice that I got early in my career. I blurted out a pearl of wisdom offered by Marty Siegelⁱ, my first boss at Salomon Brothers in the late ‘80s: “Dress British, think Yiddish, talk sports”. My fashion preference has moved towards Italy over the years, but the other two nuggets still hold true. Yet when I mentioned this to an old colleague of mine, he said, “Really? You didn’t go with “Sell Rosh Hashanah, Buy Yom Kippur”?” 

The phrase has a long history among traders, regardless of ethnicity. This piece about the adage, from my friend Bob Pisani, arrived in my inbox this morning. He correctly ascribes the phrase’s lasting popularity to seasonality. The holidays occur during the September to early October period. Since September is typically the worst month for stocks, a strategy that keeps traders out of the market for a week or more during that month has a high likelihood of success. 

The aforementioned CNBC article references work by Jeffrey Hirsch, the publisher of the Stock Trader’s Almanac. That publication, which was created by Jeffrey’s father Yale in 1967, was a fixture on trading desks by the time I began working. In the pre-internet days, almanacs were a key research tool because they contained a wide swath of information in an easy format. If you wanted to know, say, the population of Idaho, you could go to the World Almanac and look it up. The Trader’s Almanac combined all sorts of useful statistics and market knowledge in a calendar format, making it an invaluable resource.   

In any event, the younger Hirsch recently displayed a very useful table on social media. It shows that on average, the S&P 500 (SPX) over the Rosh Hashanah to Yom Kippur period averaged a -.0.5% loss since 1971, with losses occurring 29 out of 52 times. That’s not the most robust strategy, to be fair, but not a terrible one. Part of the problem is that Jewish holidays are a moving target. They move around based on a lunar calendar, unlike civic and most Christian holidays – Good Friday and Easter being two notable exceptions. Thus, while the seasonality is generally sensible, the specific timing varies in a given year. 

So why does this adage persist? I like Ike for a reason. 

There is indeed a religious aspect to the advice contained in the adage. If one sells his positions before the holidays begin, then one won’t be distracted by markets when one is meant to be atoning for his sins. But according to some of the then-old-timers at Salomon, along with my dad, who also started his career there, 1955 was the game-changer. 

The Dow Jones Industrial Average (INDU)ⁱⁱ closed at 483.66 on September 16, Rosh Hashanah eve.  It rose 3.78 points, 0.78%, over the ensuing week to close at 487.44 on the 23^rd. But things changed over the next weekend. 

President Dwight Eisenhower had a heart attack on Saturday, September 24^th, 1955. Yom Kippur began Sunday night, the 25^th, and continued through Monday the 26^th.  When markets reopened on Monday, the Dow fell 31.89 points (-6.54%), which was then the 2^nd biggest single-day point drop.  Those who had sold on Rosh Hashanah avoided a huge drop! 

 As you know, traders are a very superstitious bunch, so any strategy that could avoid a huge loss immediately became popular — regardless of one’s religious beliefs.   

Actually, the “buy Yom Kippur” part didn’t work in 1955 – at least not initially.It was in fact a rocky October, with the Dow bottoming at 438.58 on October 11^th. The Dow rose 2.28% to 465.92 on September 27^th, the day after Yom Kippur, when it became apparent that the President could pull through, and another 1.68% on the 28^th.  But starting the following Monday, October 3^rd, when the average dropped 2.3% to 455.69, INDU never closed above 465.92 until November 4^th.  Yet in another seasonal parallel to prior years, the October 1955 low proved to be a lasting one – at least until it was pierced in October 1957 when another bull run began. 

This year, 2023 (or 5784), the days of the week line up with 1955 – Rosh Hashanah Friday night to Sunday and Yom Kippur the following Sunday night to Monday – but dates are off slightly – 15^th-17^th and 25^th-26^th this year versus 16^th-18^th and 26^th-27^th in 1955. We’re amidst our second “up one day, down the next” pattern this week. Though it means we have moved little on a weekly basis, if the pattern persists, it would mean that volatility is increasing on a daily basis. I certainly hope that none of us are rooting for a Presidential crisis, but considering that this year’s “Sell Rosh Hashanah” starts with a triple-witch and UAW strike and comprises an FOMC meeting, perhaps the adage makes some sense this year. 

[i]Not to be confused with his namesake and contemporary, a confessed insider trader [ii] For those of you who know that I detest the Dow as a historical anachronism and are wondering why I choose that measure, remember that we are talking about events from 68 years ago. The Dow was the preferred market measure back then. The percentages and timing are similar if we use SPX.

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