‘Sell in May and go away’ suggests investors should sell stocks in May, as they tend to underperform through October. The strategy has roots in vacation cycles, bonus allocations, and the 1929 and 1987 market crashes.
Academic papers and market research have explored seasonal patterns in equities, highlighting their long-term growth despite volatility. Staying fully invested is safer than trying to time the market, and using indicators like earnings, valuations, and interest rate direction can help make better portfolio decisions.
The ‘Sell in May and go away’ adage has a weak track record over the past 40 years, with the S&P 500 consistently showing positive returns in over 75% of summer periods, supporting a bull market continuation.
Bears are pointing to significant market gains since late October and the latest peak in March, with the S&P 500 Index soaring nearly 28% in five months. Dip buyers may wait for the rally to fizzle before inching back, given inflation uncertainty, slowing consumer spending, GDP, and waning risk appetite.