Stocks Drop As Investors Haunted By Fed’s Ghouls—Though Halloween Isn’t Always A Spooky Day For Market

Topline

The stock market dipped Monday as investors spent Halloween spooked by the Federal Reserve’s rate hike plans, but history says Halloween is not typically a spine-chilling day for the market.

Halloween 2022 was a bit spooky for Wall Street.

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Key Facts

The Dow Jones Industrial Average fell 0.3%, or 110 points, while the S&P 500 dipped 0.6% and the tech-heavy Nasdaq dropped 1%.

This Halloween is a particularly scary one for the market and the economy, as the U.S. flirts with a recession and inflation sticks at its highest level in four decades, but traders are not always fearful on the holiday.

On the 16 Halloweens when the market was open since 2000, the Dow has risen eight times and fallen eight times.

The Dow has gained 0.1% on average in that span, placing stocks’ trick-or-treat odds at nearly exactly 50/50.

The worst Halloween in that stretch was October 31, 2011, when the Dow fell 2.3% amid the European sovereign debt crisis.

What To Watch For

Monday may be Halloween, but investors’ greatest fright this week will likely come Wednesday when the Fed shares the results of its latest policy meeting. Another 75-point increase to the federal funds rate is all but certain, but what the central bank shares about its plans for rate hikes into 2023 will be the market’s primary focus given the strong inverse relationship between the funds rate and stock performance.

Contra

Despite Monday’s drop, the Dow is still on pace for its best October in the index’s 126-year history, up 14%. The S&P and Nasdaq had more pedestrian months, with 8% and 4% respective gains.

Crucial Quote

Jason Draho, UBS Global Wealth Management head of asset allocation for the Americas, wrote in a Monday note to clients the latest round of quarterly earnings “were better than feared,” but said the recent bear market rally “doesn’t look sustainable” given the bond market’s weakness, intimating the market’s October surge was more trick than treat.

Tangent

There’s a popular investment strategy to buy stocks October 31 and sell May 1 based on a theory that the market typically performs better from November through April than May through October.