What You Can Expect From the Halloween Effect

It may be after Oct. 31, but the Halloween indicator is just beginning its six-month run. The indicator — also known as the Halloween strategy or Halloween effect — is based on the principle that stocks typically perform better between Oct. 31 to May 1, than they do from May through the end of October.

In today’s issue, we’ve repackaged Financial News Anchor Jessica Borg’s video from Sunday’s Weiss Ratings Daily. In it, she interviews Senior Analyst Jon Markman, who explains the Halloween indicator and recommends some large-cap stocks that can give you a sugar-free treat!

Transcript from Sunday’s Weiss Daily Briefing Video

Jessica Borg (narration): It may be the spookiest day of the year…but in the world of investing, it’s the start of something beautiful.

JB: Jon, tell us about the Halloween effect — or Halloween indicator, as it’s known. And in your experience, does it hold weight?

Jon Markman: Well, it’s very simple. The Halloween indicator is an observation that stocks do better from Oct. 31 to May 1 than they do from May 1 to Oct. 31.

And that makes sense, because money flows into the economy from the end of the year. In the beginning of the year, we have a lot of contributions to 401(k)s  and other retirement accounts. 

November, December, January, February and March are typically very strong months for capital gains.

JB: So now is really the time to jump in.

JM: I mean … I think the Halloween effect is something that you should be aware of — if you’re afraid of whether this is the right time to invest or not, if you feel that maybe the market is too high, maybe you better keep money out — don’t do that. Apply the money now.

JB (narration): Senior AnalystJon Markman is editor of Pivotal Point and The Power Elite, where he highlights the companies dominating a niche.

JM: The market is not very liquid, unfortunately. So, most of the money is going to go into the most liquid stocks, and that would be your big-cap stocks:

Google (Nasdaq: GOOGL)Microsoft (Nasdaq: MSFT)Tesla (Nasdaq: TSLA)Berkshire Hathaway (NYSE: BRK)JPMorgan (NYSE: JPM).

But I think you can do better.

JB (narration): There’s a large-cap stock Jon recommends that mostly flies under the radar: Danaher (NYSE: DHR).

JM: It makes equipment that both scientists and drug-makers use to create pharmaceuticals. And this is a tremendous business and there are only a couple of companies that dominate, and Danaher is one of them.

It’s not very well-known, but it’s a large-cap stock. It’s one everyone should own, I think. It’s a great one to buy on pullbacks like the one that happened just recently.

JB (narration): Danaher’s share price went from $279.60 July 21 to $310.74, Oct. 21.

JB: Jon, you write in detail about the story behind a stock, or the story behind a company. What is it about this one that’s appealing to you?

JM: Danaher is a company that was created to make money. I know that sounds kind of crazy because all companies were created to make money.

Danaher is a company that understands on the most fundamental level how to return money to its investors.

JB (narration): Another name is Copart (Nasdaq: CPRT).

JM: It’s software that’s used by all the junkyard fleets, the used-car fleets.

And used cars are in incredible demand right now because there are not enough new cars, so Copart — its margins are shooting to the sky.

JB (narration): And there’s one company Jon sees soaring over the next two years: Monolithic Power Systems (Nasdaq: MPWR).

It’s bound to climb higher, especially amid the chip shortage.

JM: It’s a very little-known but successful semiconductor manufacturer. They specialize in the power units of computers and mobile devices. And this company is just minting money.

JB (narration): Jon recommended the stock to his readers when the share price was $272. Right now, it’s about $510.

JM: And I think it’s got a long way to go — it should get to $1,000 over the next two years.

JB: What are some other stocks that are smart to get into right now?

JM: Accenture (NYSE: ACN). It is the largest software consultant in the world. It has tens of thousands of programmers all over the world. They create the software that the manufacturers need.

It’s almost a recession-proof business. It’s extremely well-run. I’ve been recommending it for many years. 

JB (narration):  Despite supply-chain bottlenecks and other issues, Jon says overall — the market today is a prime place to put your money.

JM: There’s a lot to worry about in the world right now: inflation, politics.

But don’t let those issues keep you from being an investor.

JM: What really matters is the growth of the population and increase in productivity. If you have those two things going for you, the market is going to continue to move higher.

JB (narration): And missing out on profits? Now, that would be scary…

JB: Senior Analyst Jon Markman, always appreciate your time and wisdom.

JM: Thank you. Always great to talk with you, Jessica.

Thanks to our guest, Senior Analyst Jon Markman. If you're interested in learning more from Jon, you can register for today's Moneyshow Virtual Expo here. His presentation, "The Seven Best Bets as Online Gambling and Entertainment Collide," will be held from 4 p.m. - 4:30 p.m. Eastern.

That's it for this week's Weiss Ratings Daily video edition. Keep an eye out for next Sunday's video, and until then, have a great week!

About the Financial News Anchor

During her award-winning career as an anchor and reporter with ABC News and CBS News, Jess has covered the gamut — politics, consumer affairs and finance, including extensive reporting on the 2008 global economic crisis. 

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