Sell ETFs in May and Go Away? | ETF Trends

A centuries-old adage seems to hold true for a seasonal trend in the stock market.

Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research, uses the old quote to best describe the next few months: “Sell in May and go away. Do not return until St. Leger’s Day.” As it turns out, historic evidence shows that the S&P 500, including mid- and small-cap indices, all tend to experience down months between May through October.

Should investors heed the adage and sell their stock ETFs?

Data from 1945 shows that the S&P 500 showed its strongest six-month performance during November 30 through April 30. Additionally, the historic data also reveals that the S&P 500 advanced more than three out of every four years in the same period, whereas the period from May through October showed a “seasonal slump.” [Stock ETFs Slump After S&P Downgrades U.S. Debt Outlook.]

Furthermore, the seasonal trend can be seen in S&P MidCap 400 and SmallCap 600 indices.

Stovall attributes the seasonal weakness to reduced capital inflows, vacations and earnings reality. He also argues that investors would do better by switching to a semi-annual sector rotation strategy instead of outright selling stocks. Investors who owned the benchmarks during the November to April period would have been better off switching to a 50% exposure to Consumer Staples and Health Care sectors for the off season.

For more information on the S&P 500 index, visit our S&P 500 category.

  • SPDR S&P 500 ETF (NYSEArca: SPY)
  • iShares S&P MidCap 400 Index Fund (NYSEArca: IJH)
  • iShares S&P SmallCap 600 Index Fund (NYSEArca: IJR)

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.