Sell In May And Go Away – S&P 500 (Trading Seasonality)

Last Updated on June 13, 2021 by Oddmund Groette

Is sell in May and go away true?

It turns out this is very true. The period from May until October is a seasonally very weak period for the S&P 500.

Does this mean you should sell your stocks in May?

If you are a long-term buy-and-hold investor – no. Then you just keep your stocks and forget about it.

However, if you are a short-term trader you can exploit many of the seasonalities that exist in the stock market.

We have made an update on this post:

The sell in May and go away seasonality

Sell in May and go away must be one of the most famous phrases in the stock market. And, perhaps surprisingly, the phrase is spot on.

Let’s test and find out. There is a lot of academic empirical evidence showing this anomaly has been in existence for many decades, both in the USA and elsewhere.

We test the following on the ETF with the ticker code SPY that tracks the S&P 500 from 1993 until today:

  • Buy the open on the first day of May, sell the open first day in October, versus
  • Buy the open on the first day of October, sell the open first day in May.

Our time periods are not equal. We chose to exit in October instead of November because we know the 4th quarter is the best quarter historically.

Buying the open in May and selling the open in October gives this accumulated chart:

As we can see, it’s more or less a flat return over 24 years! There are “just” 9 losing periods, but they average a loss of 10,77% vs. an average gain of 7.21% for winning periods.

Buying the open in October and selling the open in May gives this accumulated chart:

Now we are talking. The annual return is 9.04% with only 57% exposure in the market (time in the market). The average winning period is 14.04% vs the average losing period of -11.16%. Just 3 losing periods: 2000, 2007 and 2008 (flat in 1993).

 

Disclosure: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinions – they are not suggestions to buy or sell any securities.