Should You Be Selling in May?

Posted On May 5, 2020 2:57 pm
By: Steve Smith

Sell In May? No Way.

Investment adages that rhyme seems to occupy a special hold in people’s brains, and with the recent run-up and still lingering COVID-19 concerns, the advice to “sell in May and Go Away” has taken an especially firm perch in people’s minds.

What better time than now to lighten both your financial and emotional load and enjoy summer as best you can. The phrase is just one of many based on seasonality trends first popularized by Yale Hirsch in his book, The Stock Trader’s Almanac.

The theory is rooted in historical research which shows that stocks tend to experience their worst performance between the months of May and October. Alternatively, the best months of the year typically occur between November and April. Notice how significant the disparity in average return is between these two six month timeframes.

JC Parets at All Star Charts has done a great job digging into the details.

Over the past 70 years, the six-month period, starting in November ranks higher than any other rolling six months in both average return and the percentage of occurrences the market is higher. Likewise, the six months starting May 1st (that’s today!) rank lowest by both of these same measures.

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About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.