QUICK QUOTES
Sell in May and Go Away
In last year’s blog by the same title, dated 4-15-24, and in our publication, When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology (available on Amazon), this old saying in the stock market world refers to the concept of selling all your holdings in the month of May, and buying them 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%, suggesting 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 now the 2nd HIGHEST returning month of the year on average (November is the first), 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 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. Last May, 2024, the S&P 500 was flat, rising about 10 points. To break it down a bit further, the last 2 days of April saw large gains, while the first 4 days of May pulled back to erase those gains. The rest of May was then positive, with a net neutral, which was insignificant.
The truth is, the only instance of a negative May in the past 12 years was in 2019. There are much worse performing months, like February, August, and September (2024 was an anomaly for September), which would suggest selling (for those who swing trade) in late July (the 2nd best month) or early August. The funkiest, or most inconsistent months tend to be October and March, often with wild swings. That would suggest being patient through October and watching for a trend reversal, to set up for what has become the best month of the year, November.
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 Venus and Mercury Retrograde periods (lasting through most of March and about a week and a half into of April) combined with deteriorating economic conditions and the global tariff battle, weighed on the markets, as usual. The selling occurred early, and may subside by the time we reach the month of May. Watch for another rally in the next week or two as these retrogrades have ended. Of course, there is the possibility of another following downturn, possibly forming a double-bottom, which could be spurred by the upcoming Pluto-Mars opposition.
Remember to develop your own plan, stick with it, and don’t let emotion affect your investing/trading strategies!
***As always, this information is not intended to be financial advice, or any specific buy or sell recommendation, but rather a guide to assist the reader in some further understanding of the financial markets.
