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It's the season

Scott Maxwell - Tuesday, May 07, 2013

So what about ‘sell in May and go away’ (presumably until fall)?  This is the debate that goes on year after year around this time.  The answer is:  there is no clear and easy answer.  The last three summers weren’t great, but the several prior to that weren’t all that bad.  In fact, in the 1990’s, May was the second best performing month of the decade (after December).

In terms of seasonal patterns, the winter months do tend to be the best-performing, with Nov., Dec. and Jan. providing the strongest returns over the decades.  There are several possible reasons for this, but the primary ones might be the most obvious—a retail upswing near Christmas and the Holidays, in which a large bulk of annual consumer activity is condensed, which translates into company earnings; fewer vacations, so corporate productivity is more focused; as well as higher volume levels in most investment markets.  The summertime (in many regions) is less productive with more downtime, including in markets, where trading volumes tend to be quite a bit lower (however, with lower volume, the trading that does happen can be more volatile).  There also tend to be fewer governmental policy decisions made that sway sentiment. 

 

 

 

 (Source:  Ibbotson Associates/Morningstar, FPS calculations)

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