Should we expect six more weeks of winter, or will spring come early this year? Punxsutawney Phil supposedly has the answer, and we’ll all find out on Groundhog Day. According to tradition, if the clouds prevent the groundhog from seeing its shadow on February 2nd, it will come out of its winter-time burrow to herald the beginning of spring. However, if the groundhog can see its shadow, it will return to its burrow — and we’ll all be condemned to another six weeks of winter.
Whether or not a rodent actually has a way of knowing if spring is coming early, the quirky holiday and its superstitions have been preserved and even immortalized in the 1993 cult classic comedy Groundhog Day, starring Bill Murray and Andy McDowell.
Superstitious investors
It isn’t just weather enthusiasts who develop superstitions. Superstitions can also be found among investors trying to predict the often unpredictable markets. In honor of Groundhog Day, we take a look at some of the most common investor superstitions that claim to foretell market fluctuations, just as the groundhog’s shadow will supposedly foretell the weather.
Moonstruck
Are you making investment decisions when there’s a full moon? One superstition claims it’s not worth it. According to this belief, one should avoid trading during the full moon, which supposedly has a negative effect on the stock market. By contrast, a new moon has the opposite effect and, the belief goes, investments on new moon nights will be more successful. Is this true? Although some claim to have found a link between lunar phases and the market’s movements, this theory has never been proven. Still, many investors tend to be as wary of the full moon as werewolves.
Monday, Monday
If you like to start off your week by trading, perhaps you should take into consideration this much-debated theory — the Monday effect. According to this belief, if the markets went up on Friday, they will continue to go up on Monday as well. The opposite is also true — if there was a drop on Friday, it will continue on Monday as well.
October is the cruelest month
According to the October Effect, there is a decline in the markets during the month of October, a superstition that became common after some major market crashes occured in October. Most statistics contradict this belief, which is now considered more of a psychological expectation than a real phenomenon.
Big buildings, big declines
Some investors see a connection between skyscrapers and market recession based on past events, expecting large declines after construction of major buildings is completed. The Great Depression, for example, came after the construction of the Empire State Building was finished, and the DJ100 reached a two-year low just after the Sears Tower was built. There is no scientific justification for this theory, but some investors tend to believe it.
The healthcare connection
According to another common belief, healthcare conferences influence the stock market. Investors who follow this theory believe that it’s best to buy healthcare stocks before the JP Morgan healthcare conference in January, and sell them during the American Society of Clinical Oncology annual meeting in May or June. Though this theory seems to be based on the contents of the conferences, it is actually just a superstition.
Avoiding superstitions while investing
As fun as guessing games can be, when it comes to the stock market, it’s better to base your decisions on facts and data rather than debatable theories — and not let superstitions be what guide you.
All investment involves risk. Past performance is no guarantee of future results.