The saying “sell in May and go away” is an assumption that summer months will either see stale results or sell-offs. The times to buy are after the fall, in the fall, and early in the year, before the optimism of spring.
But for investors, it’s the economic season that matters, not the growing season, and the economic season you want to avoid is “fall,” which can happen at any time.
At the bottom of this story you will find a list of all the stocks I owned as of April 27. If you buy the adage “sell in May and go away,” then it would make sense for me to dump all these dogs until we get a good shake-out in the market. Dump the Amazon.com, Inc. (NASDAQ:AMZN). Dump the Apple Inc. (NASDAQ:AAPL) Dump it all and buy them back in October, or even November.
But what does the evidence suggest?
Summer Falls in Economic Spring
During three of the first four years of the current economic recovery, which began in 2009, the old saying made sense. Shares fell sharply during the second quarter of 2010, during the third quarter of 2011, and again during the second quarter of 2012.
The seasonal pattern did not hold during 2013 and 2014, and those were the current recovery’s best years. The 2015 drop began in August but accelerated in September, after traders came back to work, and the negative pattern was repeated over that Christmas, taking the S&P 500 down to 1,829 in February 2016.
Last year’s rally went through the summer, pausing only during the presidential election campaign before resuming right afterward.
Statistically, maybe the best time to sell in May is during the third year of a president’s term of office. Both 2011 and 2015 had sharp summer sell-offs, the latter (as noted) coming late in the summer. Except … stock prices held up during the third and seventh year of President George W. Bush’s term, his worst years being 2002 and (of course) 2008.