Sell in May and Go Away:Fact or Fiction?

The numbers behind seasonal trends in the financial markets.

Traders,

If you've spent any time around the markets, you've probably heard the saying, "Sell in May and go away." It's catchy, easy to remember, and it even rhymes—but is there truth to this seasonal market strategy? Let’s unpack this well-known market adage with historical context, sector analysis, and insights to guide your investment decisions.

Historical Context: The Halloween Indicator

"Sell in May and go away"—sometimes called the Halloween indicator—suggests that the stock market experiences weaker returns from May to October compared to the November to April period. Historically, there's indeed some statistical support for this. According to YCharts, from 1999 to 2025, the S&P 500’s average monthly return from November to April was about 1.03%, compared to 0.69% from May to October. However, it's important to note that within these summer months, July stands out with a notably stronger average gain of 2.3% over the past 20 years (Visual Capitalist).

Period Average Monthly Return Notes May to October 0.69% Recent data (1999–2025) November to April 1.03% Recent data (1999–2025) July (Summer) 2.3% Exceptionally strong historically

These averages certainly show seasonal patterns, yet year-to-year returns can vary significantly due to broader economic factors like inflation, interest rates, and geopolitical events.

Sector Performance: Navigating the Summer Months

While overall market performance may be weaker during summer, not all sectors react equally. Historically, defensive sectors like Utilities and Healthcare have held up better during the May to October period. Conversely, cyclical sectors such as Technology and Financials often face greater volatility (Wealth Management).

Interestingly, more recent studies from Forbes indicate that during the third year of presidential cycles, sectors like Technology and Utilities can unexpectedly outperform. However, since 2025 marks the first year of a new presidential cycle, such patterns might not hold true this time, adding complexity to your investment decisions.

A recent CNBC article highlighted that despite mixed performance, Technology and Consumer Discretionary can still shine, particularly in July, driven by factors like AI enthusiasm.

Sector Rotation Strategies: What Should You Do?

Based on historical data, investors considering a seasonal rotation strategy in 2025 might:

• Avoid: Technology, Financials, and Energy—typically more volatile during the summer months, particularly outside the third presidential cycle year.

• Rotate Into: Defensive sectors like Utilities, Healthcare, and Consumer Staples, known for stability during uncertain market periods.

Of course, these strategies should be adjusted according to real-time economic indicators like the current inflation rate (2.83% annualized as of February 2025) and ongoing geopolitical developments.

Expert Opinions: To Time or Not to Time?

While historical data is intriguing, most financial experts advocate caution against market timing strategies. Both Investopedia and Fidelity emphasize the long-term advantages of a buy-and-hold approach, warning that frequent portfolio adjustments can lead to increased costs and missed opportunities. A study from Manulife Investment Management supports this, highlighting that long-term investors typically outperform those who attempt seasonal timing.

Looking at 2025: Proceed with Caution

The start of 2025 has shown mixed market signals. While enthusiasm from sectors like AI has propelled strong market starts, achieving a third consecutive year of high returns is historically rare, and caution is advisable.

Conclusion: Should You Sell in May?

The "Sell in May" strategy does have historical support but comes with significant caveats. Rather than relying purely on historical averages, investors should stay informed about current economic conditions and consider a balanced, diversified approach.

Ultimately, while the "Sell in May" adage offers food for thought, successful investing usually comes down to consistency, risk management, and staying informed rather than attempting to time the market perfectly.

Keep an eye on market trends, consult financial advisors when necessary, and remember: Past performance doesn't guarantee future results—but knowledge and preparation can give you an edge.

Stay patient, stay strategic, and together we will conquer the markets!

Ryan Bailey
VICI Trading Solutions