Sell in May and Go Away
This old saying in the stock market world refers to the concept of selling all your holdings in May and buying back in October. However, actual statistics may not quite favor this strategy…
Over almost the last century, May (as well as February) has traditionally produced a -0.1% return, 2nd only to September’s – 1%. The time frame ranging from May - October has returned only an average of 2.5%, while November - April has returned a little over 5.3%. This suggests there may be some truth to the statement.
However, studies have found that the month of July, which occurs only 2 months after May, is actually the HIGHEST returning month of the year on average, followed by April, December and January. The May – October time frame, can also be broken down by the month. Following are the average return results for almost 100 years for each month in that range:
MAY = -0.1%, JUNE = 0.7%, JULY = 1.7%, AUG = 0.7%, SEPT = -1.1%, and OCT = 0.6%.
There has been a shift in the last 20 years, however, with August’s 0.7% gain turning to a -0.7% loss, and September’s average loss increasing to -2.1%. December’s average gain has been reduced from 0.9% to 0.4 %, while March has also suffered an average decrease of -0.6% , though that figure may be skewed due the pandemic in 2020. November has also become the leading month for average gains over the last 2 decades, at 3.5%, with July still 2nd at 2.1%.
Though there are several internal factors that create these figures, including the fact that the old adage may very well be a “self-fulfilling prophecy,” which causes some of these well known cycles to start a bit early. There are always those who will attempt to get ahead of the crowd, and either buy or sell early.
Shorter term traders, who wish to take advantage of volatility throughout the year, usually ignore this concept and look for opportunities during any time period.
Long term investors are not very fond of this concept, as you would imagine, and often just close their eyes and cross their fingers (especially those with 401k’s and IRA’s).
Although history certainly favors the November-April time frame, long term investors shouldn’t fret “Sell in May, and Go Away”, as the market often rebounds by the Fall.
Astrologically speaking, the recent Mercury retrograde period (lasting the first 3 weeks of April) and Jupiter-Uranus conjunction (April 20) has many leading astrologers expecting high volatility throughout the spring, and a probable dip or correction toward the end of the summer. Being an election year, however, additional factors may artificially hold up the equities markets. With a Jupiter-Saturn square occurring in mid-August (in the midst of yet another Mercury retrograde), the typical decline in late August and September could be brewing, and has the possibility to be quite sizeable. For those who manage their own portfolio, it may be wise to lighten up on any holdings that are not considered long term.
Develop your own plan with your Financial Advisor and don’t let emotion affect your investing/trading strategies!
