Sell in May and go away | Myth or investor wisdom?
What is it?
The age-old saying "sell in May and go away" resonates strongly in the investment and trading world, reflecting the historical trend of the US stock market performing better in the November - April period, compared to May - October. This belief is reinforced by significant market declines, such as the 1987 crash, typically occurring in late winter or early spring.
Detailed Overview
Over the past 50 years, data analysis supports this notion, with the Satrix S&P 500 averaging a 9.5% gain and the Satrix 40 growing 14.12%, on average, from November - April. This is in comparison with a mere 0.9% and 4.1% average increase for the Satrix S&P 500 and Satrix 40, respectively, during the rest of the year. Particularly worth noting, is the third year of the US presidential cycle, which historically intensifies this trend, with even bigger spreads.
May tends to mark the onset of weaker market performance, while November stands out as the strongest month overall. Positive returns may be expected in May and June, although subdued compared to other periods. September historically emerges as the weakest month in the year.
Diving into sector performance during the May - October period, growth oriented industries like technology and mining tend to outperform others.
Summary
In summary, historical data supports the "sell in May and go away" sentiment, with the performance gap between the November - April and May - October periods magnified during the third year of presidential cycles. As 2024 unfolds in line with past patterns, investors anticipate a period of consolidation over the winter months, yet remain optimistic about market prospects amidst the Federal Reserve's tapering efforts and robust US employment.
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