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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