In the market trend analysis report dated 10th April, we looked into the “Sell in May and Go Away” adage and the resulting conclusion was investors should remain vested through May as the predictive power of this adage is questionable and the saying has been significantly off the mark in the last decade.
Looking at the past 30 years of S&P 500 performance from 1993 to 2022, the statistics show May has seen the S&P 500 return 70% of the time in the last 30 years with an average return of 0.56%. Even when faced with a negative May, the S&P 500 has generated positive annual returns in 7 of those 9 years (77.8%) with attractive average returns of 9.04%.
With May just past us, this report will look at the historical 3 & 6 months returns following May which further lends credence that investors should remain vested.
When we look at the S&P 500’s returns in the 3 months following May for the past 30 years from 1993 to 2022, it has yield gains in 19 of the 30 years (63.3%) with an average return of 0.83%. For the 6 months return following May, the index has generated positive returns in 21 of the 30 years (70%) with a higher average return of 3.95%. The table also shows when faced with a negative May with substantial declines of over 5%, the S&P 500 still tends to generate attractive returns of over 5% in the following 6 months as shown in 2010, 2012 and 2019.
The data further supports the thesis investors should remain vested through May and the following months as they are usually rewarded with positive average returns over the following 3 & 6 months, with higher average returns generated over a longer timeframe.
Join our telegram channel on technical analysis for trends, entry and exit prices over Stocks, ETFs, and Indices!Featuring regular TA posts and requests to analyse specific stocks