Why the ‘Halloween Indicator’ Didn’t Work This Year and What Investors Are Doing Instead

Many investors know the old saying: “Sell in May and go away.” It’s based on a market-timing idea called the Halloween Indicator, which suggests selling stocks near the start of May, holding cash through the summer, and buying back in around Halloween or November. Historically, this strategy leaned on the fact that stock markets often performed better from November through April than from May through October.

However, this year the plan didn’t pay off. Investors who sold in May missed out on nearly a 7% gain in the S&P 500 by late September 2026. Instead of weakening, the market bounced back strongly after a dip earlier in the year. The S&P 500 was up over 13% for the year by the end of September, showing that staying invested worked better than stepping aside.

Experts say the Halloween Indicator has some weaknesses. The strategy assumes markets follow a predictable seasonal pattern, but real-life conditions change. Costs like taxes, trading fees, and the risk of missing quick rebounds make switching in and out of the market tricky. Academic studies also suggest the seasonal effect can be exploited and may not hold up over time.

So what are smart investors doing instead? Most stay diversified and keep their money invested all year. They may adjust their portfolios a little, moving money between sectors that tend to do better in different seasons. For example, defensive sectors often outperform in the summer months, while cyclical sectors shine in the winter.

This year’s strong market was supported by solid corporate earnings and a resilient economy, even with challenges like rising oil prices and geopolitical tensions. While the old calendar-based rule might still hold some historical interest, it’s clear that simply selling in May and waiting until November to buy again isn’t the best strategy in today’s markets.