EQM Capital LLC Blog – Sell in May, or Stay and Play?

Posted on May 7, 2016

Although the old adage worked last year, it doesn’t have a great track record.


After falling 11% in the first six weeks of the year, stocks have bounced back, albeit as a slower pace. In the six weeks following the February 11th bottom, the S&P 500 gained 11%. In the five weeks that followed it rose 1.4% and through the end of April were only off about 3% from the highs set last May.

A recovery in oil prices, better economic readings, and some more positive data points from overseas, all helped spur the market recovery. Now we enter the month of May when the old adage advises stock investors to “sell in May and go away.”

Since 1970, according to Credit Suisse, the S&P 500 has gained an average of 1% in the period between Memorial Day and Labor Day. When stocks rose over that period, they gained an average of 5.6% and when they declined, they lost an average of 8%. While trading volumes do tend to be lower in the summer as investors and traders take vacations, history doesn’t really support the rhyme.


Last year the strategy would have worked.  An investor who sold the S&P 500 on the Friday before Memorial Day and repurchased the Index the Tuesday after Labor Day would have avoided a 7.4% decline.

But what about this year?

The summer will start off with some potentially market-moving events. The next Fed meeting is scheduled for June, although they appear unlikely to take rate action given April’s meager job readings. Later in the month, the UK will vote whether to remain a member of the EU. July will bring another batch of corporate earnings reports, which may continue to be mixed. There are political uncertainties surrounding the Presidential election. And more potential “gotchas” coming from Europe and Asia. But all things considered, we continue to believe that diversification and a long-term focus will ultimately be rewarded.

So don’t go away in May, stay and play, and remain focused on your long-term investment goals!

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.