The Dow Jones index traditionally rises after Halloween, writes financial analyst Mark Hulbert. This year's holiday could bring investors more gifts than usual

In the six months after Halloween, U.S. stocks are likely to generate good returns, writes financial analyst and Hulbert Financial Digest author Mark Hulbert in a column for MarketWatch . The analyst's findings are based on the so-called "Halloween Indicator", which reflects the seasonal tendency of the US stock market to show the greatest growth in the period from November 1 to May 1.

Thus, from November 2014 to May 2015, the Dow Jones Industrial Average grew by 2.6%, but over the next less than six months (as of October 22) it fell by the same amount. Hulbert looks at how the stock market performed after Halloween, taking into account how the index behaved two months before the holiday. The final return on investment depends on this.

According to calculations by Hulbert Financial Digest, since the Dow Jones index launched in the late 19th century, it has risen an average of 4% between November and May, after declining for two months before that. However, if the index grew two months before Halloween , then over the next six months its growth increased to an average of 6.8%.

The latest data speaks in favor of increased growth in US stocks this year and next, writes Hulbert. Since the end of August, the Dow Jones Industrial Average has already increased by 5%. The “Halloween Indicator” is one of the types of seasonal strategies that American investors are trying to make money on. A better known saying is Sell in May and go away. Those who follow it sell shares at the end of May and exit the stock market in order to return to it in the fall.

Hulbert notes that the indicator does not guarantee that the market will necessarily rise, but even if it goes down, it will mainly be in the summer months. Thus, during the crisis of 2007–2009, the losses of the US stock market in the summer months were twice as large as in the winter months, the analyst writes. An even more noticeable difference was observed during the peak of the dot-com crisis, associated with the collapse of shares of high-tech companies, which occurred from March 2000 to October 2002. Then, during the periods from November to May, the Dow Jones grew by 3.5%, while in the remaining months it fell by 36%.

Previously, May was traditionally a very weak month for the Russian market due to the fact that this month was the cutoff for dividends for the entire year, says Evgeniy Malykhin, partner, director of the investment department of Aton Management. “However, now the practice of a rather weak May is beginning to go away, since legislative cut-offs now fall in the summer, and some companies with high quality corporate governance are switching to quarterly payment of dividends,” he notes.

“Our tests showed that, according to statistics, the weakest month is September, and the strongest month is December, so purchases in November are quite justified,” says Malykhin. However, according to him, the Russian market is too young, and it is difficult to build an effective strategy on such a time interval, the manager notes. “I would advise using this strategy as one of the additional factors for making a decision. It’s unlikely that you should attach decisive importance to this and build your trade on it,” the manager notes.

Previously, December was indeed characterized by growth in the Russian market due to excess liquidity, and May was characterized by a decline following a series of annual meetings and dividend cut-offs, but for the second year now we have been living in a different world, says Alexander Losev, CEO of Sputnik Capital Management. According to him, the Russian market has lost its internal energy and has become dependent on too many external factors, the impact of which is not seasonal, but permanent, for example, fluctuations in oil prices and global capital movements, with 70% of the volume of transactions in Russian shares and ADR accounted for by foreigners who are now inclined to reduce risk in emerging markets.

“As long as the largest volumes of transactions in shares are carried out abroad, while Russia is under sanctions and the ability to attract new investments is limited, while the economy is not growing and high volatility in oil and the ruble remains, it is impossible to talk about seasonality in the Russian market,” notes Losev.

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