Sell In May & Go Away

There's an old saying on Wall Street regarding which months of the year are best to own stocks. The saying goes like this, sell in may and go away. Why? Historically, over the long term, stocks have underperformed during the May to October period. Meanwhile, the November through April period has produced a much higher return.

For example, here is a graph of the 2006 to 2015 period, which includes the Great Recession. The blue line shows the annual stock market returns for the May through October period. Over the decades, stocks were essentially flat. The yellow line shows annual returns each year for the November through April period. Over the same decade, stocks were up about 60%.

The seasonality of the stock market is not just this short term phenomenon. Over the last 100 years, May through October returns have averaged 2.08% per year, while returns from November through April have averaged 5.13%, which annualizes at a 10.3% annual rate. Wow, this is a significant gap.

Now remember, there are many, many years when this seasonal gap does not come into play, so we can't count on it happening every year. But, 2019 has already had a significant run-up in stock prices. We think the odds of some volatility in the stock market over the next few months has increased.

Here is the takeaway. If you will be needing extra cash from your portfolio in the next few months, now is a good time to raise it. The longterm still looks promising. It's important not to lose sight of this fact. We here at Generations Wealth Planning appreciate your confidence in us. If you have any questions or comments, please feel free to let us know.

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