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S&P 500 Returns Following Down Mays

|Includes: SPDR S&P 500 Trust ETF (SPY)
What happens to the S&P 500 following down months of May? To answer that, I searched through S&P 500 prices for the last 60 years.


The S&P 500 lost 8.20% this past May. Since and including 1950, there have been 25 other times that the S&P 500 went down in May. In the Junes that followed those 25 negative Mays, the S&P 500 went up 12 times and down 13 times. That does not look much like any sort of trend. What about the returns for the remainder of the calendar year for the S&P 500 for those negative Mays? Well there something interesting seems to have happened.
 
Following down Mays, the S&P 500 went up 17 times and down 8 times for the full year. On average, the S&P 500 returned 3.54% following down Mays. However, when the S&P 500 lost 2.5% or more in May, the S&P 500 went up 11 of 13 times returning on average 7.13% for the rest of the year.

It is important to note that these are observations; history can be a guide but only that. Indicators help when placing market bets, but risk management still needs to be rigorously applied especially when sizing the bets..

Authored by Tom Henderson, Strategist JBH Capital.



# of     End of May till % Return
Down   % May Year End From June 1st
Mays Year Return (up / down) Through Year End
         
  2010 -8.20 - -
         
1 1962 -8.60 up 5.82
2 1956 -6.57 up 3.25
3 1970 -6.10 up 20.38
4 1984 -5.94 up 11.09
5 1966 -5.41 down -6.73
6 1967 -5.24 up 8.30
7 1971 -4.16 up 2.47
8 1951 -4.06 up 10.46
9 1982 -3.92 up 25.71
10 1974 -3.36 down -21.45
11 2006 -3.09 up 11.67
12 1979 -2.63 up 8.94
13 1999 -2.50 up 12.86
14 1977 -2.36 down -1.06
15 2000 -2.19 down -7.06
16 1973 -1.89 down -7.05
17 1998 -1.88 up 12.69
18 1976 -1.44 up 7.27
19 1983 -1.24 up 1.56
20 2002 -0.91 down -17.55
21 1965 -0.77 up 4.54
22 1953 -0.32 up 1.10
23 1981 -0.23 down -7.57
24 1969 -0.22 down -11.02
25 1955 -0.13 up 19.97
         
         
      17 up Average % Return
      8 down 3.54% (all 25)
         
        Average % Return
        when May was down
        at least 2.5%
        7.13%


Disclosure: Small Long and Short S&P 500 exposure. Most assets are in cash.