Sell and Sail Away

It seems the old adage, “Sell in May and Go Away!” has taken hold this past month as the markets plunged into bear territory more than once. The saying, based on the premise that the six summer months from May through October (crop seeding, growth and harvesting) typically register lower gains than the six months of winter from November through April (when the bears are hibernating). The "Sell in May" maxim is said, according to Kiplinger’s “to have originated centuries ago in England when merchants, bankers and other interested parties in London's financial district noticed that investment returns generally did worse in the summer.” 

Analysts are on the fence about its validity (remember the summer of 2020?) Sure, summer can get slow but we are not in a typical cycle where this adage applies. Using 142 years of data, analysts at Virginia-based CXO Advisory Group looked at three strategies: (1) holding stocks November-April and cash May-October (i.e., "Buy in May and Go Away"), (2) doing the opposite and (3) holding stocks year-round. While strategy (1) delivered better returns than (2), strategy (3) was by far the best overall, its superiority magnified when transaction costs were factored into the analysis, according to Forbes magazine. A similar study, based on a more recent 20 years' worth of data, yielded the same conclusion, per the Wall Street Daily.