June is the last month of the second quarter, and the first month after the classical adage, “Sell in May and go away.” As the last month in the quarter it tends to find a lack of investor interest and buying power compared to July’s rather more impressive fresh investment of corporate dividends and other flows.
Even though there can be some “portfolio pumping” on the last day of the month, the overall weak June performance is part of why folks are comfortable selling in May. The semi-annual assessment beginning with May confirms the unfavorable tendencies.
The compounded 65-year May to October performance on a $10,000 investment is essentially breakeven: a loss of $221. That compares with an eye-popping $838,468 compounded return performance for November to April for the same period.
One exception is that June performance tends to be strong in presidential election years; and the difference is significant. The main indexes average returns between 0.9% and 1.9% in election years despite the overall performance for June being negative for both the Dow Jones and S&P 500. However, the worst June for both was in 2008, the last time we had a presidential election with no incumbent running. That is what the historic data shows.