The “Sell in May and Go Away” maxim originated in London under a slightly modified phrase: “Sell in May and go away, come back on St. Leger’s Day.” The St. Leger is a famous fall horse race in the U.K. that dates back to 1776. The premise behind the saying is that investors should sell their equity positions in May, enjoy the summer months, and avoid seasonal market weakness, and then come back to the market when seasonality trends become more constructive in November.

Why is the phrase so popular? Math and marketing may have something to do with it — areas Wall Street is pretty good at. Other than an easy adage to remember, the May through October time frame has been the worst six-month return window for the S&P 500 since 1950, as opposed to the best-performing six-month return window from November through April. This historical seasonal pattern has been consistent enough — and the phrase popular enough — that it may have become a self-fulfilling prophecy over many years.

While the U.S. might not have the St. Leger race, we did celebrate the Kentucky Derby over the weekend, and the thought of “enjoying” some golf and beach time this summer sounds appealing, but we don’t wholly subscribe to going away from the market over the next six months.

The table below highlights rolling six-month price returns for the S&P 500 across all 12-month periods since 1950. And while the May through October time frame has historically underwhelmed with an average gain of only 1.7%, returns importantly have been positive 65% of the time. Of course, that doesn’t stack up very well compared to the 7.2% average gain between November and April, but other technical and fundamental factors point to upside potential beyond the average 1.7% gain during this year’s “Sell in May” period. Longer-term momentum indicators point to more potential upside for stocks before year-end, earnings continue to surprise to the upside with estimates holding steady (estimates typically fall 2–3%), while economic activity is humming along at a solid pace. Furthermore, Friday’s goldilocks jobs report showed labor demand slowing but still growing and cooling wage growth, helping raise the probabilities for two Federal Reserve interest rate cuts by year-end.

MAY TO OCTOBER RETURNS AREN’T GREAT — BUT THEY TEND TO BE POSITIVE

RECENT YEARS HAVE YIELDED BETTER RETURNS

More recently, the month of May and the “Sell in May” time frame have yielded better results. Over the last 10 years, monthly returns in May have averaged 0.7%, with nine of the last 10 years producing positive monthly returns. This compares to the longer-term average May return of only 0.2%.

 May through November average returns have also been more constructive at 4.0%, with 80% of periods generating positive results.

So, the price of admission to positive returns during this May – October time period may be greater volatility, but we recommend staying the course. Contact us with any questions.

~Mark and Elise.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All information is believed to be from reliable sources; however, LPL makes no representation as to its completeness or accuracy. This research material has been prepared by LPL Financial LLC. Tracking #575900 (Exp. 5/25).