An old stock market adage is broken

“Sell in May and go away” is an old saying that should probably be ignored.

While it’s true that stocks have historically done better from October through April compared to May through September, there’s usually a lot more going on than the calendar.

Andrew Adams, a research associate at Raymond James wrote in a note on Wednesday:

I have received no shortage of questions from people asking what they should do because of this statistical quirk, and my answer has largely been to ignore it and focus on what is going on now.

It also inspired me to dig into the data a bit, and while the average return during May-September for the S&P 500 going back to 1990 has only been 0.01%, 17 of those years ended up with a positive return and the average gain at some point during those months was 7% above where the S&P 500 began May 1st. The data for each respective year is on the following page and confirms that there have also been plenty of times when you wanted to stay invested in stocks through the summer.

Other strategists have noted that in a secular bull market, like the one we’re in now, returns throughout the year are more likely to be higher compared to a bear-market period.

Also, a longer-term approach to the market has paid off. If an investor stayed long stocks throughout the year from 1995 through 2015, performance was weaker — but not much worse — than if they’d liquidated in May, FBN Securities noted.

“Seasonality trends can act as a guide yet they are far from hard and fast investing rules that you should solely base trade decisions off of,” Adams wrote. “Therefore, as long as the ‘price’ keeps acting right, it is best to not try to overthink it since there have been plenty of good summers for stocks, too.”

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