The Truth About “Sell in May and Go Away” for Investors

May 13, 2024

It’s one of the classic proverbs of Wall Street: “Sell in May and Go Away”.

Here is the problem with that.

While stock market returns are generally lower during the May-October period, they are still quite positive.

The above chart from Fisher Investments, using data going back to the 1920s, could be used to support the “Sell in May” catchphrase, as it shows that the 6-month period ending in October has the worst trailing performance compared to any other 6-month period throughout the year.1 But here’s the thing…

It still features an average return of over 4%.

Furthermore, as the team over at Fisher points out, 

The frequency of positivity is even higher here, at 71 of 98 years—72.4%. This, too, is a mite more often than the 71.5% frequency of positivity in all rolling 6-month stretches since 1926. Nothing here shouts stay away!2

Remember too that one of the biggest problems with selling stocks is missing out on compound interest. The researchers at DataTrek give us the compounded returns of this period: 

…Should you “sell in May and go away”? History says no. It is true that, since 1980, the S&P has generated weaker compounded price returns from June – Oct (+76%) than Jan – May (+531%) or Nov – Dec (+297%…However, not being invested in the 5 months after May meant missing out on positive returns in most years. Staying invested in the S&P – rather than timing it based on seasonality – produces far superior returns over the long term.3

A 76% return isn’t too shabby.

To put a cherry on top of all this, the probability in an election year has also been on the stock market investor’s side. Ryan Detrick shows that election years tend to see a summer rally and strength during the May through October period, with returns up 2.3% and positive 77.8% of the time.4

It’s been said that the best time to sell is when you need the money, and the best time to buy is when the stock market is open. While this advice is overly simplistic, so is “Sell and May and Go Away.” Investors should be cautious about taking personal financial advice from cute colloquialisms as gospel truth.

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Sources: 

  1. “Tell ‘Sell in May’ To Go Away”, April 29, 2024. Accessed online: Tell ‘Sell in May’ to Go Away
  2. Ibid.
  3. Tweeted by @DataTrekMB at 9:16am on April 30, 2024. Nick Colas & Jessica Rabe (DataTrek) (@DataTrekMB) on X
  4. “Buy in May and Stay? At Least in an Election Year”, April 30, 2024.Buy In May and Stay? At Least in an Election Year