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Are Your Investments Still At Work On Stock Market Holidays?

Sep. 25, 2020 5:24 AM ET
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If you’ve got money in the New York Stock Exchange (NYSE), you should know that holidays could affect your investments. Nine times each year, the NYSE closes for holidays. The NASDAQ does the same.

The NYSE and NASDAQ close on the same stock market holidays each year. They are the same as the Federal Reserve banking holidays, except for Columbus Day. The nine holidays include New Year’s Day, Martin Luther King Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

When the Stock Market Closes Early

But the NYSE and NASDAQ will occasionally close for days near the holidays. For example, on Black Friday, the day after Thanksgiving, the stock market closes early. It also closes early on Christmas Eve. Typically, the stock market is open from 9:30 AM until 4 PM. But, on Black Friday and Christmas Eve, it closes at 1 PM instead of 4 PM.

If the holiday is on Saturday, then the stock market closes on the Friday before the holiday. The stock market closes on Monday if the holiday falls on a Sunday. Very rarely, the stock market is closed for three-day holiday weekends.

Rare Non-Holiday Closures

In rare situations, the stock market closes for more than the three-day holiday weekends. It will also close if there are outstanding events that threaten the safety of the people working on Wall Street.

The most recent non-holiday closures were because of the September 11 attacks and Hurricane Sandy. The stock market floor closed for more than three days due to the COVID-19 pandemic. Despite the floor being closed, the market stayed open, but only for electronic trades.

How Investors Feel During Stock Market Closures

To keep investors feeling confident, the stock market has a policy that limits closings to three days. If the stock market closes for too long, then investors become nervous. When the stock market reopens, the market becomes volatile until investors settle down and can watch the money again.

When the stock market is closed for more than three days, investors experience fear. Fear motivates them to take their money out of the market because they do not know what is happening during the closure.

What Happens When the Stock Market is Closed

On a typical day, after-hours trading and pre-opening trading happens. After-hours trading happens between 4 PM and 6:30 PM. Pre-opening trading occurs between 8 AM and 9:30 AM. These trades occur because companies share information before and after the market opens.

Investors know that the market is always changing, which is why so many people worry when the market is closed for holidays. People make trades in the early and late hours because they try to get ahead of the competition and make more money.

International Markets Have Different Holidays

American investors often invest in foreign stocks, so investors need to recognize that foreign markets have different holidays. For example, Canada has a different Thanksgiving, and they are closed on their annual holiday in mid-October and other unique holidays. Their various openings and closings can affect the US market and vice versa.

Trading Around the Holidays

During the holidays, the markets tend to slow as investors and traders are busy with their families and vacations. Businesses do not share much news during the holiday seasons. The slow market gives investors time to relax.

Interestingly, on New Year’s Eve, the stock market usually suffers a loss. Then, when it reopens on January 2, it picks back up. The trades that occur before or after the new year as people make trades for tax purposes and to balance their portfolios. There are also years where the opposite happens.

Why Trade During Open Hours

For the best price on a trade, investors need buyers and sellers. When the stock market is open, more people can buy and sell. When the market is closed, liquidity drops because there are not as many people available to make deals.

Consider how auctions work. When you sell an item at an auction, you want more people at your auction because you will get more bids. With the stock market open during the eastern time zone business hours, they get many people involved in deals. But the numbers drop when the markets close for the day and holidays.

What Do Investors Do When the Market is Closed?

Over the years, the stock market has made many people wealthy. Of course, no one can predict the future, so it can be difficult to wait and see what happens when the market is closed for a holiday. Over the years, people make the most money when they buy and hold. It might not be exciting, but statistically, it has worked.

Warren Buffett offers advice about closed markets. He recommends expecting that you will not make money on the stock market. Instead, he buys with the assumption that the market might close for five years! He also recommends buying stocks that you could keep for 10 years, rather than 10 minutes.

Over the years, stocks drop fast. But, they go up more often than they go down. The dramatic drops are what scare investors. Many investors stick with the wait-and-see because they listen to investors like Buffett, who understand that money that sits often does well. But, it is also essential for investors to have enough money that they can meet their basic needs.

If you sell when the stock market is down, you lock in the loss. But, if you need money, you might not have your money sit in the market. You might have penalties or other issues if you withdraw money early.

So, many people look for alternative ways to make money while leaving their investments working over the holidays or other days that the markets are closed.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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