“Sell in May and go away.” It’s a long-held Wall Street truism that reflects the observation that equities tend to post negligible gains during the summer months.
Below is a seasonality chart of the S&P 500. It shows the average progress of the S&P 500 stock index over the course of a calendar year. The black line looks at the average performance since 1950 and the orange line shows the average since 2000. (The blue line is where we are now – 2021.) There’s not much difference, but the two lines are included to show that there hasn’t been much change over time.
The flat spot in performance (otherwise known as the summer doldrums) is highlighted in green. Despite the old saying, it really doesn’t start in May; rather, it starts around the middle of July. (Checks calendar…hmmm…it’s mid-July).
But the truth of the situation is that the seasonality trend has been shifting over the past few years. If we only look back at the last 5 years, which is added as a grey line to the chart below, it appears that the market was still able to produce noticeable gains up until the beginning of September. Since September and October have notoriously been the worst performing months for equities, this makes sense that you’d see performance leveling off in this period.
So, the question is: Do equities still really experience the summer seasonal doldrums? Over the long haul the answer appears to be yes, but over the past 5 years at least, these “doldrums” have largely failed to appear, and missing the summer months meant missed opportunities. As is so often the case, the conventional wisdom fails to accurately reflect the reality in which we actually exist. If you are considering investing and your financial future, summer, fall, winter, or spring, the time is always right to speak with an advisor and move forward thoughtfully.
“People are too quick to accept conventional wisdom, because it sounds basically true and it tends to be reinforced by both their peers and opinion leaders, many of whom have never looked at whether the facts support the received wisdom. It’s a basic fact of life that many things ‘everybody knows’ turn out to be wrong.”
– Jim Rogers, co-founder of the Quantum Fund and Soros Fund Management
Jim, Mark, and Dave
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