Is it really best to sell in May?

May 1, 2016 09:00 AM

May has had a checkered past, literally. When combined with June the S&P 500 was down 75% of the time between 1965 and 1984. Yet, it completely reversed that between 1985 and 1997 with 13 straight gains. 

The sheer magnitude of that shift illustrates that seasonal tendencies can themselves be cyclical. This is reinforced by the almost even up-down split after 1997. 

The semi-annual assessment beginning with May also seems to confirm the unfavorable tendencies that gave rise to the cliché, “Sell in May and go away.” The compounded 65-year May-October performance on a $10,000 investment is essentially breakeven: a loss of $221. That compares with an eye-popping $838,468 November-April compounded return for the same period. So there may be something to the adage after all. 

Election years are even weaker. While the vital statistics table is already fairly negative, in election years since 1950 May actually ranks 11th for the Dow Jones Industrial Average and S&P 500. The additional early-to-mid-year uncertainty is especially pronounced this year because of the starkly different party platforms.

About the Author

Alan Rohrbach is Lead Analyst and President of Rohr International, Inc.  He is an international equity index, interest rate and foreign exchange trend advisor. His forte is ‘macro-technical’ analysis of how fundamental influences blend with technical aspects to drive trend psychology. Clients include international banks, hedge funds, other portfolio managers and individual traders.