Halloween Strategy: Does This Seasonal Investing Approach Work for Australians?

For decades, investors around the world have debated whether the so-called Halloween Strategy—sometimes summed up as “Sell in May and go away”—actually gives portfolios a seasonal edge. While this tactic has roots in the northern hemisphere, Australian investors are increasingly curious about its potential as they navigate 2025’s volatile market landscape.

What Exactly Is the Halloween Strategy?

The Halloween Strategy is a timing-based investment approach. It suggests investors should hold stocks from 31 October (Halloween) through to 30 April, and either sell or reduce their stock exposure from May through October. The core idea: historically, the November-to-April period has delivered stronger equity returns than the rest of the year.

• Origin: Popularised in the UK and US, but gaining traction in Australia.

• Why Halloween? It’s a calendar anchor point—investors ‘enter’ the market at Halloween and ‘exit’ in May.

• What’s the rationale? The theory points to market cycles, global business trends, and even investor psychology as reasons for stronger returns in these months.

Does the Halloween Effect Work in Australia?

While the Halloween Strategy’s track record is well-documented in the US and Europe, Australian data paints a nuanced picture. Over the past two decades, several studies and ASX data reviews have shown that the ASX200 has tended to perform better between November and April, mirroring global patterns—though the effect is less pronounced here due to differences in sector composition, dividend cycles, and the impact of tax-time trading.

In 2025, Australian investors are facing a unique mix of factors:

• RBA rate cuts in early 2025 have fuelled a risk-on mood, especially in growth stocks.

• Tax reform debates around capital gains and franking credits are influencing investor behaviour, with some preferring to hold through the end of the financial year (June 30).

• Global volatility remains high, meaning seasonal patterns may be less reliable than historical averages suggest.

For example, in the November 2023 to April 2024 window, the ASX200 rose 6.4%, compared to a flat result from May to October 2024. However, this pattern wasn’t as clear in previous years, highlighting the importance of context and market cycles.

Pros and Cons of the Halloween Strategy for Aussie Investors

Should you jump on the Halloween bandwagon? Here’s what to weigh up:

• Potential Upside: If the historical trend holds, investors may capture stronger returns and avoid the market’s traditionally weaker months.

• Lower Volatility: The May–October period often coincides with global uncertainty (think US mid-year earnings, European summer slowdowns), so reducing exposure could buffer against drawdowns.

• Tax and Dividends: The Australian market’s dividend-heavy nature means some investors may prefer to hold through May–June for distributions, blunting the Halloween effect.

• Costs: Frequent buying and selling can rack up brokerage fees and trigger capital gains tax events—potentially eating into any seasonal gains.

• Market Timing Risks: No strategy is foolproof. Trying to time exits and entries can lead to missed rallies or buying back in at higher prices.

Making the Halloween Strategy Work in 2025

For investors keen to experiment with seasonality, a balanced approach is best:

• Use ETFs or Index Funds: These offer broad exposure and low trading costs, ideal for seasonal strategies.

• Set Clear Rules: If you decide to follow the Halloween Strategy, automate your trades or set reminders to avoid emotional decision-making.

• Review Tax Implications: Check the impact of any trades on your tax position, especially with ongoing 2025 tax reforms under debate.

• Don’t Go All-In: Consider applying the strategy to a portion of your portfolio rather than the whole lot, to reduce risk.

• Monitor and Adjust: Track performance and be willing to adapt if market conditions change. 2025 is shaping up to be another unpredictable year for equities.

Conclusion

The Halloween Strategy offers a fascinating window into how market seasonality can influence investment returns. While the evidence in Australia is mixed, 2025’s market dynamics and policy changes could make this a timely tactic for those willing to experiment—just be sure to balance risk, cost, and your long-term goals. As always, staying informed and flexible will be your best defence against market surprises.