The stock market is subject to a seasonal effect in that at certain times of the year, month or even week, share prices can rise or fall.
The stock market can be affected by having extra days off for Thanksgiving or Christmas. The markets tend to see increased trading activity and higher returns the day before a holiday or a long weekend, a phenomenon known as the holiday effect or the weekend effect.
The end-of-month phenomenon has a more pronounced effect on small-cap and low-priced stocks. The research shows that small-cap stocks have considerably higher returns on the last day of the month versus high-cap stocks.
Some hours offer the best opportunities to buy and sell stocks, so it makes sense to focus on them rather than risk losing money at other hours. The first two and last two hours tend to be the best times to trade the stock market—the beginning and the end of the day.
Key Takeaways
Since 1950, the Dow Jones Industrial Average (DJIA) has averaged a decline of 0.8%, while the S&P 500 has averaged a 0.5% decline during the month of September. The September Effect is a market anomaly, unrelated to any particular market event or news.
September is traditionally thought to be a down month. October, too, has seen record drops of 19.7% and 21.5% in 1907, 1929, and 1987. 3 These mark the onset of the Panic of 1907, the Great Depression, and Black Monday. As a result, some traders believe that September and October are the best months to sell stocks.
The January Effect is a purported market anomaly whereby stock prices tend to regularly rise in the first month of the year. Actual evidence of the January Effect is small, with many scholars arguing that it does not really exist.
Stock market performance on Mondays is not significantly different from the performance on any other day since 1975, according to a study by Arizona State University researchers. So, go ahead and buy stocks whenever you have the cash.
So, if you're asking yourself if now is a good time to buy stocks, advisors say the answer is simple, no matter what's happening in the markets: Yes, as long as you're planning to invest for the long-term, are starting with small amounts invested through dollar-cost averaging and you're investing in highly diversified ...
The Bottom Line. Investing $100 a month adds up over time, especially with compound interest. Making small sacrifices every day to consistently add $100 to your stock investments every month will benefit you in the long run.
Stock prices rise after Christmas
Since the new fiscal year starts in January, the weeks after Christmas is therefore marked with the stock market becoming invigorated by fresh capital, be it from companies looking to expand or investors having more resources at their disposal.
The January effect is a hypothesis that there is a seasonal anomaly in the financial market where securities' prices increase in the month of January more than in any other month.
The term Monday effect refers to a financial theory that suggests that stock market returns will follow the prevailing trends from the previous Friday when it opens the following Monday.
In short, the 3-day rule dictates that following a substantial drop in a stock's share price — typically high single digits or more in terms of percent change — investors should wait 3 days to buy.
Stock turnover is generally lower and price movements less pronounced on the last trading day of week. Companies with bad news to report often take advantage of this slowdown by making their announcements on Fridays.
Stock prices fall on Mondays, following a rise on the previous trading day (usually Friday). This timing translates to a recurrent low or negative average return from Friday to Monday in the stock market.
Inflation concerns: Around the same time, the Fed (US Central Bank) announced that it would consider accelerating the reduction of its asset-purchase stimulus program at its meeting on December 14-15, as the supply-induced inflation is lasting longer than the Fed initially expected.
Reasonably accurate long term. Stocks have worked their way higher 67% of the time in November and 69% in December since 1969, says Craig Johnson at Piper Jaffray. November and December are even better for the S&P excluding the '50s and most of the '60s, Johnson says.
The tendency of stocks to perform better in December than in any other month of the year. This may be because of increased sales and earnings due to the Christmas season, or because of expectations for new products at the start of the next year.
The upshot: Like early market trading, the hour before market close from 3 p.m. to 4 p.m. ET is one of the best times to buy and sell stock because of significant price movements, higher trading volume and inexperienced investors placing last-minute trades.
Assuming a deduction rate of 5%, savings of $240,000 would be required to pull out $1,000 per month: $240,000 savings x 5% = $12,000 per year or $1,000 per month.
If you took an initial $100 investment and added $100 per month for 20 years, you would have about $77,000. Now, say you invested $100 per month for 25 years -- you would have approximately $134,000.