Title: Analysts Debunk “Sell in May and Go Away” Adage as Stock Market Performance Remains Strong
The traditional Wall Street adage “sell in May and go away” may not hold water this year, as analysts debunk the myth with strong evidence of positive stock market performance during the historically weak May-October period.
The six-month period from May to October is often considered the worst for stock market performance. However, LPL Financial‘s chief technical strategist Adam Turnquist pointed out that the average returns for the S&P 500 during this period have been positive since 1950, reported Business Insider on Monday.
Turnquist’s data shows an average return of +1.7% for the past 10 years, which jumps to +4.0% for the last decade. This suggests that selling stocks in May based on historical trends might not be the best strategy.
“Unless investors can seek superior returns in other asset classes, being out of the equity market may not have been the best strategy, with stocks still delivering positive six-month returns, on average, over all the May-October periods studied,” Turnquist said in a recent note.
Market strategist Ryan Detrick of Carson Group also noted the positive returns during this period, particularly in May, which has seen positive stock market returns in nine of the past ten years, with an average gain of 0.7%.
In conclusion, Detrick discovered that in years where there is a presidential election, such as 2024, the stock market typically experiences a summer rally prior to the November surge. The period from May to October typically sees gains of 2.3% and higher 78% of the time.
The potential irrelevance of the “Sell in May and go away” adage comes in the wake of recent statements by the Federal Reserve which has decided to keep interest rates steady, emphasizing the need to allow more time for restrictive monetary policies to bring inflation towards the Fed’s 2% goal. This decision has had a significant impact on market dynamics.
Despite concerns raised by investors like Larry Summer and Wall Street veteran investor Ed Yardeni, who predicted a “classic 10% correction” in the S&P 500 index, other experts remain confident in the continuation of the bull market, citing a robust U.S. economy and the potential of artificial intelligence (AI) as key drivers.
Overall, the positive stock market performance during the historically weak May-October period challenges the traditional adage, suggesting that investors may not need to follow the “sell in May and go away” strategy this year.
