In This Article:
Does the old adage "sell in May and go away" still hold true in this market environment?
Yahoo Finance markets and data editor Jared Blikre — who also hosts the Stocks In Translation podcast — gives a history lesson on how this trading practice performed for stock traders (^DJI, ^IXIC, ^GSPC) over the past 100 years, weighing in on whether its a winning strategy in regards to market seasonality.
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We've all heard the saying sell in May and go away. But how well does it actually work for investors? I'm Jared Blikre, host of Stocks and Translation. Now, sell in May is older than you think, like 19, uh, 1694 old. London traders first coined it, timing their market exits in the summer, then buying again just after the famous St. Leger horse race. And that was in September in the middle of the month. Now, if we fast forward to 1986, our friend of the show, Jeff Hirsch, he put that phrase front and center in his stock traders almanac. And nowadays, Americans mostly think it's Memorial Day in early May through Labor Day in early September. But the big question is, does this old saying, does it still hold true? So let's crunch nearly a century of numbers. From 1928, we split each year into three equal parts. And it turns out that May through August was pretty strong until about 1960, but then things flipped. Between 1960 and 1987, the early days of modern Wall Street, it really paid to step away from the summer. Since then though, not exactly. Summers have been positive, just not as strong as the rest of the year. So let's keep this simple and imagine if you invested $1,000 in 1960 in two different ways. If you'd followed sell in May, and that's the white line you're looking at, you were actually winning in the 1960s and 70s. But then things changed with the big crash in 1987. And after that, the fully invested strategy, in green, it pulled ahead. Sitting tight in these months has been a winning strategy, at least on balance since then. So finally, let's take one more look at the month by month gains and losses since 1988. This is a seasonality chart. And if you notice, you can see August and September, those two bars are poking below zero. They consistently drag. So if you wanted to steer away from potential trouble, these two months might be it, but not the entire summer. So bottom line, sell in May made sense once upon a time, and today, you're probably better off staying invested. And maybe just keeping an eye out for potential trouble around the new school year. I'm Jared Blikre. Tune into stocks and translation for more market decoding deep dives, new episodes on Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcast.
All right, Jared, thanks so much.