Hamptons Effect

Labor Day Weekend is typically considered the last big weekend of summer, which is why many of us opt to spend it camping, barbecuing, sleeping, or doing other fun and leisurely things. Or, if we’re a ritzy Wall Street type, we might choose to forego the campgrounds and instead spend the weekend at our villa in the Hamptons, New York’s premier hoity-toity beachfront vacay spot.

So what does this mean for investors? Well, depending on which market sector we’re looking at, it can mean that we’ll see a little dip in investing right before the holiday weekend, as all those brokers prepare to take that final summer vacay. It also means that, in those same market sectors, we’ll probably see a jump in trade activity after the long weekend, when those same brokers head back to the office and resume working.

The Hamptons effect isn’t a sure enough thing to always hang our investment hats on, though. While the past several years have shown that some market sectors—looking at you, food stocks—seem to totally conform to the Hamptons effect, others do not. And even with food stocks, the changes in trading activity probably have less to do with the fact that brokers are heading to the Hamptons than they do with the fact that food stocks (and some utility stocks, FYI) tend to ebb and flow seasonally. And furthermore, an increase in trade activity doesn’t necessarily mean an increase in share price. It might, but there’s no guarantee.

So in other words...we as investors shouldn’t rely on the Hamptons effect to make all of our investing dreams come true. We should, just as we do throughout the year (hopefully), do our research and avoid basing our investment strategy on the vacation plans of Wall Street brokers.