Will the ‘Halloween Indicator’ trick or treat investors?

This Halloween may not just rain candy on kids, it could also bring a sweet stock rally for investors thanks to a phenomenon known as the “Halloween Indicator.”

Also called the “Halloween effect” or “Halloween strategy,” it boils down to this: The six months from Oct. 31 until May 1 tend to bring stronger stock returns than any other six-month period of the year. This means investors trying to time the market should buy stocks in November to ride the wave up, then sell in April before they drop. In other words, “Sell in May and go away” (to that Hamptons beach house, or wherever you veg out) until markets return from the dead next Halloween.

But is it true? Historically, the Halloween effect holds up more often than not. Since the 1890s, the Dow has produced 5.3% annualized returns during winter months versus 1.9% come summer. But the razor in this apple is that it doesn’t work every year, depending on what’s been bubbling in the political and economic cauldron.

Tariff volatility, geopolitical tensions, Fed rate cut fog, and other headwinds could spook a post-Halloween stock rally. We’re also missing the biggest tailwind of all: mid-term elections, which historically spark returns averaging 10% in the six months after they’re held...but that won’t happen until next year. In the year before mid-term elections, returns historically come in below average at around 3%.

Some treats for you: This summer’s record-high gains suggests that Wall Street could finish the year strong. Returns from this year’s “Sell in May” strategy from May through October 2025 averaged 22.5%, according to Chief Market Strategist Ryan Detrick at Carson Group. And when the S&P 500 is up more than 15% YTD—it’s now up 16%—November and December tend to bring in a combined 4.7% additional returns that could push total-year returns over 20%.

“The momentum off of the April lows has been potent in a way that often signals more gains ahead,” Baird investment strategist Ross Mayfield told Brew Markets. “Since 1950, following at least a 15% drawdown, the 2025 rally is the fourth best. In every instance, the market has been positive six months following a six-month rally of this magnitude. Momentum begets momentum.”

But Mayfield adds that markets can’t simply continue up and to the right nonstop: “I would not be surprised if the market needed to take a breather at some point in the next six months.”

In other words: Be prepared for a few jump-scares.—JD