The old “sell in May and go away” adage sounds like bunkum, but is it?
Drew Dickson of London-based Albert Bridge Capital is a value investor, not a seasonal strategist, but curiosity caused him to take a look at the data. The first thing, says Dickson, is that since 1940, every single month has shown an average positive return. All months are winners.
Still, there is a big difference between May-September and October-April returns. US stocks averaged gains of 3 per cent in the five months from May to September, compared to 9.4 per cent in the seven months from October to April.
Put another way, the S&P 500 has seen cumulative May-September gains of 658 per cent over the last 82 years, compared to 95,000 per cent between October and April.
There “may be something to this ‘selling in May and going away’ thing, especially over very long time horizons’, says Dickson.
Of course, it’s not a practical strategy for most investors. It’s also likely to be a fluke – “random nonsense”, as Dickson puts it – “but history suggests that if you’re waiting to dip back into equities, you should probably wait a few months”.
