Skip to main content

Sell in May and go away?

Sell in May and go away? Let's take a quick look at the figures behind this well-known market adage. Charting the market's seasonal returns below.

Here's a look at the S&P 500 and its seasonal returns, November - April vs. May - October,  from 1950 to 2014. This chart comes to us via Chartoftheday.com. 

Stocks Sell in May


As you can see, the bulk of the market's gains since 1950 came during the "good period" of November through April. The seasonal period covered in the "sell in May" mantra is not nearly as strong. Returns in this summer period have been subpar, as Chart of the Day points out. 

Here's a look at the seasonal period in the SPY (S&P 500 ETF) from the financial crisis of 2008 to today. 



Since 2008, we find an even mix of upward moves and market corrections in this May - October period. The initial "sell in May" period shown here coincides with the selling panic of 2008. The bull market of 2009 - 2014 has been far more supportive of the seasonal pattern. However, the nasty correction of 2011 began with 8 consecutive down weeks in May - June. 

We don't know what the 2014 May - October period holds, but we're not off to a very strong start given the recent divergence between the major indices and the weakness in growth and momentum stocks. Some traders have noted that recent upward moves in the Dow and S&P, weighted towards large cap names, are masking a breakdown in the broader market. 

In Joe Fahmy's latest video update, he says the market needs time to digest its recent moves. Fahmy feels the market is healthy and supportive of long trades 2-3 times a year. When it's not as supportive, you lighten up your positions or go to cash and take a break.  You'll note that this is his last scheduled video until the fall, so at least one trader I follow is taking some time out for travel during this "sell in May" period. 

Popular posts from this blog

How to "Pull the Trigger" on Your Trading Ideas

In our last post, I quoted hedge fund manager, Jim Leitner on the importance of following up on your investment ideas.  Today I'd like to follow up and share some thoughts on how you can learn to consistently "pull the trigger" on your best trading setups and investing ideas. In order to help you do that, we'll take from the best and offer up key insights from interviews with top traders and trading psychologists like Alan Farley, Brett Steenbarger, and Doug Hirschhorn .  Now before we get to their key insights on overcoming trading anxiety and pulling the trigger on your trading ideas, let's remember what Jim Leitner said in his interview: "Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda...

Market Wizard, Steve Clark on Trading: Grow Your Equity Curve

Trading wisdom recap: Steve Clark , founder of Omni Partners, was featured in Jack Schwager's 2012 book, Hedge Fund Market Wizards .  Clark's interview with Schwager provided us with some valuable trading insights; "Lessons from Hedge Fund Market Wizards: Steve Clark" was one of our most popular posts ever. If I had to pick my favorite sections from Clark's chapter, it would be boiled down to these two concepts: "Do more of what works (and less of what doesn't work)" and "Manage your equity curve". Here's his full quote on the supreme importance of growing your equity curve :  "Your job as a trader is to make the line of your equity curve go from bottom left to top right. That's it. Don't get hung up on other supposed "mandates". Protect your capital and the direction of that equity line. "   I will leave you with one last series of quotes from Steve Clark's interview with Jack Schwager. ...

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4. ...