“Sell in May and go away.” A cute little piece of advice that has been around the financial markets as long as I have. Whoever coined it must have decided that the markets best times were the first four months of the year and after that, only bad things happened, or at least nothing significant happened.
Those of you who have been with us for any length of time know that we have never sold everything in May and sat out of the markets. Here is why. Going back to 1970, (and I think 43 years gives us a pretty good historical perspective), the S&P 500 Index has had 25 years in which the month of May showed a positive gain and 18 years where it has had a negative return for the month. 58% of the time May has been positive and 42% negative. In addition, in the 18 years where May had a negative return for the month, the S&P 500 Index finished that year with a positive return. To be fair, there were a number of years when May produced a positive return for the month and the S&P500 had a negative return for the year.
So what can we glean from all these statistics I have just shared? Nothing. Sell in May and go away is a cute little rhyme with not much statistical backing. There is some statistical backing that shows us that during the summer months trading volume goes down and because of that lighter volume, markets might become a bit more volatile.
Whether it’s in May or any of the other eleven months, (I’m going to coin my own rhyme, get out in June before the swoon), timing the market is a fools game that no one can do. Long term investing requires patience and the knowledge that short term trends mean nothing. Let’s start a new saying.
Stay in May and you’ll be OK!
Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
Copyright ©2013 Mike Berry. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.
