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…The popular seasonal stock market saying “sell in May and go away” conveys that the stock market tends to under-perform in the six summer months compared to the six winter months but is this indeed the case?…Is this typical period of weakness in the summer months only seen in U.S. markets, or does it exist in other countries as well?
The S&P 500 Index seasonal pattern over the past 50 years
On average the summer half-year generates negligible returns:
Source: Seasonax (click here to analyze the pattern)
As the chart shows, advances in the S&P 500 Index in the summer half of the year between May and October are significantly weaker than in the rest of the time. However, the absolute peak in prices is not in May as the saying suggests, but rather in July…
Detailed results by country
What then is the situation in other countries? The following table shows the half-year results of the eleven largest stock markets by market capitalization. The half-year periods in which a risk-adjusted investment was worthwhile are highlighted in green. The loss-making six-month periods are highlighted in red.
Country selection: Half-year results
Only in two countries was it worthwhile to invest in the summer months:
The table above underscores that the seasonal weakness in the summer months – also known as the “Halloween effect” – indeed exists. In all countries the winter half-year was stronger than the summer half-year.
- In nine of the eleven countries the difference in returns was quite pronounced.
- In six countries the summer half-year even showed losses!
- Only in two countries, Hong Kong and India, was a significant gain of well over one percent posted in the summer half-year.
- In two of the eleven countries, France and Taiwan, losses of more than three percent were recorded during the summer months.
Be careful this summer!
As shown above, the seasonal summer weakness – known as the Halloween effect – does, in fact, exist…