Automatically receive the internet’s most informative articles bi-weekly via our free bi-weekly Market Intelligence Report newsletter (sample here). Register in the top right hand corner of this page.
…The popular seasonal stock market saying “sell in May and go away” conveys that the stock market tends to under-perform in the six summer months compared to the six winter months but is this indeed the case?…Is this typical period of weakness in the summer months only seen in U.S. markets, or does it exist in other countries as well?
The S&P 500 Index seasonal pattern over the past 50 years
On average the summer half-year generates negligible returns:
As the chart shows, advances in the S&P 500 Index in the summer half of the year between May and October are significantly weaker than in the rest of the time. However, the absolute peak in prices is not in May as the saying suggests, but rather in July…
Detailed results by country
What then is the situation in other countries? The following table shows the half-year results of the eleven largest stock markets by market capitalization. The half-year periods in which a risk-adjusted investment was worthwhile are highlighted in green. The loss-making six-month periods are highlighted in red.
Country selection: Half-year results
Only in two countries was it worthwhile to invest in the summer months:
Source: Seasonax
The table above underscores that the seasonal weakness in the summer months – also known as the “Halloween effect” – indeed exists. In all countries the winter half-year was stronger than the summer half-year.
- In nine of the eleven countries the difference in returns was quite pronounced.
- In six countries the summer half-year even showed losses!
- Only in two countries, Hong Kong and India, was a significant gain of well over one percent posted in the summer half-year.
- In two of the eleven countries, France and Taiwan, losses of more than three percent were recorded during the summer months.
Be careful this summer!
As shown above, the seasonal summer weakness – known as the Halloween effect – does, in fact, exist…
Editor’s Note: The original article by Dimitri Speck has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
Scroll to very bottom of page & add your comments on this article. We want to share what you have to say!
munKNEE.com has joined eResearch.com to provide you with individual company research articles and specific stock recommendations in addition to munKNEE’s more general informative articles on the economy, the markets, and gold, silver and cannabis investing.
Check out eResearch. If you like what you see then…
Related Articles from the munKNEE Vault:
1. Is There Any Validity To the “Sell in May & Go Away” Proverb?
Some market participants may be looking to heed the advice of the old market proverb “Sell in May and Go Away”. The question this article seeks to answer is whether this calendar effect is spurious, or whether this is something readers should heed.
2. Should You “Sell In May & Go Away”?
The saying “sell in May and go away” infers that the stock market is seasonally weak from May to September and, as such, one should not own stocks during that period of time. As illustrated in the chart below, however, the stock market is not particularly bearish then. It is merely less bullish (i.e. the odds of the market going down vs. up are equivalent). That’s why “sell in May and go away” is not a good trading strategy. Let me illustrate that fact further in the 10 charts below.
3. “Sell in May and Go Away” – in 9 out of 11 Countries it Makes Sense to Do So
The “sell in May and go away”, which implies that the market’s performance is far worse in the six summer months than in the six winter months is the case with respect to US stock markets but what is the status in other countries? I have examined the patterns in the eleven most important stock markets in the world and found that it does, indeed, make sense to “sell in May and go away” in 9 of the 11 countries. In which two countries has it not been the case – at least until now? Read on for the answers.
4. Does “Sell In May & Go Away” still hold true?
One of the most enduring of Wall Street axioms – falling somewhere under “buy low and sell high” but above “greed is good” – is to “sell in May and go away” and, indeed, there appeared to be some truth to the saying. Between 1950 and 2012, the Dow Jones gained an average of 7.6% annually during the November-April period, but only 0.4% during May-October. Does “Sell In May and Go Away” still hold true as a viable investment strategy? Not according to my analysis. Here’s why.
5. May Day! May Day! Should You “Sell in May and Go Away”?
Many articles have been posted today, May 1st, regarding the investing adage “sell in May and go away”. Below are links to 10 such articles on the subject to help you decide what course of action you should take.
6. Stocks: ‘Sell In May And Go Away’ – or Even Sooner! Here’s Why
Taking profits is rarely a bad idea, and staying fully invested at these levels seems foolish. That is why it might pay to raise some capital now, before the sell in May strategy comes up. Having a core position of equities along with some dry powder and keeping a look out for short-term trading opportunities is how I plan to play this market through 2013. [This article presents 5 specific reasons why it might be wise sell in May and go away – or even sooner – this year.]
7. Stop! If You Sell in May and Go Away This Year You’ll Regret It – Here’s Why
The adage “sell in May and go away” refers to selling one’s stocks in May, going into cash, and then waiting until November before buying back into the market. That] has worked the past two years…[This time round, however,] we believe there is a high probability that you would be buying at a higher price [in November] than… [what if you were to sell out] in May of 2012. [Let us explain why we are of that view.]
munKNEE.com Your Key to Making Money
Source: Seasonax (click here to analyze the pattern)