“Sell in May and Go Away”? A Long-Term Perspective

Every year around this time, a familiar investing phrase begins circulating again: “Sell in May and go away.”

It is one of the most widely repeated seasonal investing sayings, based on the idea that stock market returns tend to be weaker during the summer and early fall months compared to the period from November through April.

While market sayings like this can make for interesting conversation, they also offer an opportunity to step back and view investing through a longer-term lens.

Why Investors Look for Patterns

Human beings are naturally wired to recognize patterns. In many areas of life, this ability is incredibly valuable. In investing, however, it can sometimes lead us toward conclusions that are more coincidence than reliable strategy.

Some market trends are supported by real economic forces. Over long periods of time, economic growth, corporate earnings, innovation, and productivity have helped drive stock market returns higher.

Other patterns, however, may simply reflect temporary historical trends that happened to repeat for a period of time.

The “sell in May” theory appears to fall into this second category.

Where the “Sell in May” Theory Came From

Historically, researchers observed that the six-month period from November through April often produced stronger average stock market returns than the following six months.

This led some investors to believe they could improve results by investing only during the historically stronger months and avoiding the weaker periods of the year.

At first glance, the concept sounds appealing. But there is an important issue:

The pattern has not remained consistent over time.

What the Data Shows

The chart below compares average monthly S&P 500 returns across two different periods:

• 1928–1999
• 2000–Today

In earlier decades, some months, including May, appeared weaker on average. However, many of those same months have produced positive returns in more recent years.

In other words, the historical pattern has largely faded.

Source: Bloomberg, Standard & Poor’s

Why Market Patterns Often Disappear

This is not unusual in investing.

Once a market pattern becomes widely known, investors often begin acting on it. As more people attempt to capitalize on the trend, the opportunity can weaken or disappear entirely.

It is also possible that some patterns were never particularly meaningful to begin with and were simply tied to a specific historical environment.

Even September, which is often considered one of the market’s weaker months, appears heavily influenced by a handful of major events, including:

• The dot-com collapse
• The 2008 financial crisis
• The 2022 bear market

These declines were caused by economic and financial conditions, not the calendar itself.

What Actually Drives Long-Term Market Returns

There is no shortage of market theories and seasonal indicators.

Over the years, investors have discussed everything from the January Effect to the Super Bowl Indicator. While these ideas can be interesting, they are not what has historically driven long-term investment success.

Markets have rewarded disciplined investors because:

• Businesses grow over time
• Economies expand
• Companies innovate and create value
• Corporate earnings generally increase over long periods

These forces have persisted through:

• Recessions
• Wars
• Inflationary periods
• Political uncertainty
• Global crises
• Market corrections and bear markets

The Risk of Trying to Time the Market

Attempting to move in and out of the market based on seasonal trends can introduce significant risk.

Markets do not move predictably month to month, and missing even a small number of the market’s strongest days can meaningfully reduce long-term returns.

Historically, investors who stayed invested through periods of uncertainty have often been better positioned than those attempting to time short-term market movements.

A Long-Term Perspective Matters

At CAM Investor Solutions, we believe successful investing is built on discipline, planning, and maintaining a long-term perspective rather than reacting to headlines or seasonal market sayings.

While phrases like “sell in May and go away” may continue to appear each year, long-term financial success has historically come from staying focused on the fundamentals that truly drive markets over time.

If you have questions about your investment strategy or current market conditions, our team is always here to help.

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Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your account holdings correspond directly to any comparative indices or categories. Need to add more disclosures.

About CAM Investor Solutions

CAM Investor Solutions, a fee-only independent Registered Investment Advisor, has offices located in Colorado, Florida, and Texas. As a growing wealth management firm, we focus on the needs of our clients to improve their quality of life. Our firm’s commitment to innovation through rigorous academic research enhances how we serve a multi-generational audience.

CAM’s Specialties Include:

• Managing concentrated wealth
• Planning for stock and option compensation / company IPOs 
• Advanced tax managed investment strategies
• Custom retirement income strategies
• Cash management

Contact:
CAM Investor Solutions
info@caminvestor.com
1-844-247-0787
https://caminvestor.com

CAM Disclosure

SOURCE: S&P Global and Dimensional Fund Advisors

M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. As a fee-only firm, we do not receive commissions nor sell any insurance products. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. 

This blog has been provided solely for informational purposes and does not represent investment advice. Nor does it provide an opinion regarding fairness of any transaction. It does not constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy.

Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss. Tax planning and investment illustrations are provided for educational purposes and should not be considered tax advice or recommendations. Investors should seek additional advice from their financial advisor or tax professional.