As readers will recall from our recent preview of what equity performance this month was supposed to look like, at least based on historical data, April was supposed to be the best month of the year.
Sadly for the bulls, it has been anything but. That's the good news. The bad news is that as most know the old saying "sell in May and go away", there is nothing but pain for the next six months.
As FBN's JC O'Hara explains, the “Sell in May” slogan heard around Wall Street has some truth behind it. The gist of the saying suggests it’s better to be out of the market come May and re-enter during the fall months.
We ran the numbers over the last 20 years and found validity to the statement. We created a model that went long the market Jan, Feb, March, April, Oct, Nov & Dec. as well as a second model that went long the market May through Sept 30. We concluded that the May – Sept time period model, on average over the past 20 years, would have lost you money. The majority of the time the market was unimpressive over those summer months. The majority of the markets returns were housed in the first model that was long the months into May and the months after Sept. While there were instances where May – Sept was negative, the risk adjusted returns suggests investors do not necessarily need to exit the market but should expect flat markets with little if any of the yearly gains coming during this time period. The real money was made during other 7 months of the year. As we approach May we are not in the SELL camp yet, but rather acknowledge the fact that a volatile, stagnant, sideways moving market is what history implies. Over the next few pages of this report we examine the past 20 years and highlight where the majority of returns are found.
Naturally, all of the above implies that rigged, centrally-planned markets are even remotely comparable to normal historical markets, and trade paterns. They aren't. Still, for those who are curious what the infamous Sell in May phenomenon looks like, here it is:
And the full breakdown of the past 16 years: