Market Beat: Sell in May and go away
“Sell in May and go away” is an old stock market saying that has been around for a long time and still gets mentioned in the financial news, with other well-known adages like the “Super Bowl Indicator” and the “January Effect.”
The original saying was, “Sell in May and go away and don’t return until Saint Legere’s Day.” The expression goes back over two hundred years, it’s from England originally, when the London stockbrokers would take the whole summer off and not get back to work until after Saint Legere’s Day, which was the final horse race of the season. The stock market was very slow in the summer months in those days.
Yale Hirsch of “The Stock Traders Almanac” made the strategy of selling out of stocks on May 1 and not getting back into the stock market until Nov. 1 quite popular. On average the worst month for the market is September and the best month of the year is December based on long term averages. In most cases investors are better off to stay invested year-round due to dividends and tax considerations.
This year, May was a poor month for stocks, due primarily to the ongoing trade war fears. The S&P 500 was down -6.58%, the Dow Jones Industrial Average fell by -6.69% and the NASDAQ composite dropped -7.93%. Foreign markets fell roughly in line with U.S. markets. The EAFE which includes Europe, Asia and the Far East had a negative return of -5.42% and the MSEM emerging markets index went down by -7.53%.
The best performing stock market sector was Real Estate, XLRE was up+1.22%. The worst performing sector was Energy, the energy ETF, XLE, dropped -11.10%. Crude oil was down for the month, too. USO, the oil ETF fell by -16.48% in May but is still up +14.91% year to date.
Bonds had a pretty good month in May, the Barclay’s Aggregate Index, which consists of investment grade bonds from twenty-four different countries had a gain of +0.51%. The TLT, which is the long-term US Treasury bond fund moved up by +6.84% for the month and the TIP, the US Treasury inflation protected bond fund had a gain of +1.75%. The gold ETF, GLD, was up by +1.76%.
Corrections of more than 5% are common in the stock market and have occurred in sixty-five of the last seventy years, since 1950.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.