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Sell In May? Historical Data On A Market Adage

May 03, 2021 10:19 AM ETSPDR® S&P 500 ETF Trust (SPY)31 Comments
Ploutos profile picture


  • This article adds empirical evidence to the market adage of "Sell in May and Go Away".
  • Building off previous academic research, we see that there is seasonality in market returns across geographies, asset classes, and long time intervals.
  • While the May-October period has sharply underperformed the November-April period historically, that did not hold last year. Stocks sold off sharply in March 2020 and rallied through the summer.
  • A long-term approach to investing is likely a better avenue to building wealth, but the historical seasonality of stock market returns is notable and worth understanding for readers.

3D Rendering - Calendar for May 2021
Photo by nutnai/iStock via Getty Images

For most Seeking Alpha readers, a long-term buy-and-hold strategy, tailored to your personalized investment horizon and risk tolerance, designed to capture equity risk premia over time is advisable. With that disclaimer mentioned at the top of this

This article was written by

Ploutos profile picture
Institutional investment manager authoring on a variety of topics that pique my interest, and could further discourse in this online community. I hold an MBA from the University of Chicago, and have earned the CFA designation. My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance, and investment horizon.

Analyst’s Disclosure: I am/we are long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (31)

Greedy Chicken profile picture
@Ploutos, I hope all is well with you! Haven't heard from you in a while. You are one of the few authors on SA whose every article I make a point to read.

I'm curious about the switching "Sell in May" strategy you mentioned. For now I am going with $SZNE, which has slightly outperformed $SPY with lower drawdowns over the last month: stockcharts.com/...
Recall reading an article in Schwab's magazine that stated "Sell in May" works about 38% of the time. Agree with you that market timing is very, very tricky.
I calculated the average performances for my own portfolio over the period 1995-2020 and I found that September, June and August are the worst months, while April, January and December are the best.

The third trimester is by far the worst.

I use a stock selection system based on O'Shaughnessy's "What Works on Wall Street".
Think Long Term profile picture
the ultimate crash is right on the doorstep....people should get their money to safety...and by safety I mean most of it out of the country into another currency...the dollar is getting killed even by 3rd world countries because of Powell...a sheet of plywood going to cost $100 before the idiot acknowledges inflation is soaring.. A clown crypto coin DOGE is worth more than 3/4 of the companies listed on all the exchanges....this lala land investing is going to cause a major financial disaster soon
one difference last year (and this year) is the tax deadline was extended due to COVID. Not sure if or how much affect that has on the numbers.
I believe that that happens because in the summer months the economic activity slows down as a general rule (except last year because of the pandemic) and so the results of most companies, except those ones related with vacation activities obviously and then everything picking up again in october
I think the author has misinterpreted his data. If holding only October-May produced >15% it beats buy and hold by roughly 5%. Holding over the summer does not add 5% to the 15% you get from the winter returns or SPY would return 20% annually.
@cliftr Oct-May doesn't produce 15%. It produces an ANNUALIZED 15%. The actual return for the 7-month period, as shown in the table above, is 7.7%. The actual return of the May-Sep period is 2.6%.
throkmorton profile picture
If your smart do what your gut tells you. Bippity boppity boop.
This all stems from the old idea of brokers and big money taking the summer off, which with Covid lockdowns, hasn't or can't happen to the same effect.
Space Muppet profile picture
a person that believes this "sell in may" b.s. shouldn't invest money in stock markets
And if you take into account selling and Capital Gains taxes? 39%, 21% 28%? Who starts their summer Holidays in May? Sell in June or after 4th?
For this year, it is Sell in February and go away.
Socratic Investor profile picture
Some more observations:
-of the 25 November-April periods with double-digit positive returns, there were only 4 May-October periods that followed with a negative return.
-of the 10 November-April periods with over 20% positive returns, there were 3 May-October periods that followed with a negative return.
Based on this, odds indicate one should stay invested May-October.
Interesting article.
Buyandhold 2012 profile picture
Sell in May?

No way.
If you paid attention to the Stock Trader's Almanac, published every year for over 50 years by the Hirsches, you would not be surprised by seasonality. The tricky part is explaining it.
RettW profile picture
Rather than seasonality, which attempts to span rising rates, falling rates, recession, COVID, QE, stimulus, and whatever other spontaneous events, I prefer SA’s Toma Hentea and his backtested, market momentum formula. In fact, for the combined percentiles of the 3 month (DBB minus UUP) and (XLY minus XLP), his latest work, we should be about 84% in the market today.
racerkeith profile picture
@RettW If timing the markets were that easy, everybody would be doing it. The reality of market timing is that it is extremely difficult because assets frequently behave in an irrational manner.
pantherdoc profile picture
13 sessions of SPY flat performance at the all time high, I took profits and will wait for the next sell off, whenever that is.
Cranios profile picture
A couple of additional observations:
- The May-October time period showed a negative return 27% of the time.
- The November-April time period showed a negative return 20.6% of the time.
- The underperformance of May-October stems very little from the number of occurrences of negative returns, and very much from the magnitude of drops that generally occur in May-October.
- The real mystery is, "Why do big drops, when they occur, almost always tend to occur in September and October?" and "Is there a way to estimate which years that big drop may occur in?"
With my strategy I buy hand over fist during July-August as potential sellers are most often out BEFORE the holiday season to limit risk. What remains is low liquidity / low volatility buying. Could be that there's a sell off after those 2 months because of that.

So my Sell In May strategy means reducing risk in May-June-September-October instead.

@Cranios all sort of reasons. Tax loss selling, disappointing end of year results, autumn depression (unhappy people are more likely to sell).
@Cyril R. Crypto crash??
Could trigger selloff of epic proportions ... not if, but when imho..
christiangustafson profile picture
Sell ahead of the release of the Maricopa audit.
@christiangustafson SCOTUS wont touch it, just like before.
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