…The saying “sell in May and go away”…[infers] that the stock market is seasonally weak from May to September…[and, as such, one] should not own stocks…[during that period of time]. [As illustrated in]…the chart below, however, the stock market is not particularly bearish…[then.] It is merely less bullish (i.e. the odds of the market going down vs. up are equivalent). That’s why “sell in May and go away” is not a good trading strategy. [Let me illustrate that fact further in the 10 charts below.]
The original article has been edited here for length (…) and clarity ([ ])
Here’s the stock market’s performance during the past 10 years from each calendar year’s May-September. You can see that May-September is not consistently bearish for stocks. Some very strong rallies happened during this supposedly “bearish” seasonality.
The S&P rallied 5.6% from May – September 2017.
The S&P rallied 4.4% from May-September 2016
The S&P fell -7.9% from May-September 2015
The S&P rallied 4.7% from May-September 2014
The S&P rallied 5.2% from May-September 2013
The S&P rallied 2.4% from May – September 2012
The S&P fell -16.8% from May-September 2011
The S&P fell -3.3% from May-September 2010
The S&P rallied 20.5% from May – September.
The S&P fell -17.3% from May-September 2008.
As you can see, May-September is not consistently bearish for the stock market. The stock market has gone up 6 times and gone down 4 times from May-September. The average % change is -0.25%, which is hardly any different from 0%. When you factor in the dividends, investors actually made money from May-September.
If you use the traditional version of “sell in May and go away” (i.e. sell from May-October), you would actually be WORSE OFF than someone who just buys and holds forever. The Dow goes down 41% of the time from May-October (i.e. it goes up 59% of the time).
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The “sell in May and go away”, which] implies that the market’s performance is far worse in the six summer months than in the six winter months is the case with respect to US stock markets but what is the status in other countries? I have examined the patterns in the eleven most important stock markets in the world and found that it does, indeed, make sense to “sell in May and go away” in 9 of the 11 countries. In which two countries has it not been the case – at least until now? Read on for the answers.
One of the most enduring of Wall Street axioms – falling somewhere under “buy low and sell high” but above “greed is good” – is to “sell in May and go away” and, indeed, there appeared to be some truth to the saying. Between 1950 and 2012, the Dow Jones gained an average of 7.6% annually during the November-April period, but only 0.4% during May-October. Does “Sell In May and Go Away” still hold true as a viable investment strategy? Not according to my analysis. Here’s why.
Many articles have been posted today, May 1st, regarding the investing adage “sell in May and go away”. Below are links to 10 such articles on the subject to help you decide what course of action you should take. Read More »
Taking profits is rarely a bad idea, and staying fully invested at these levels seems foolish. That is why it might pay to raise some capital now, before the sell in May strategy comes up. Having a core position of equities along with some dry powder and keeping a look out for short-term trading opportunities is how I plan to play this market through 2013. [This article presents 5 specific reasons why it might be wise sell in May and go away – or even sooner – this year.] Words: 1280 Read More »
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