It turns out summer break isn’t just for students and school employees. Historically, stocks rise more in the 6-month period from November to April than from May to October.1 For this reason, investors have coined the phrase “sell in May and go away”. Why? Some consider “sell in May” a self-fulfilling prophecy because there is no consensus on why selling in May should earn a greater return than staying invested through the summer and mid-fall.2 This means by acting on the assumption that the market will underperform in the summer months causes the market to underperform.
Does this mean you should sell your stocks and stay far away from the market until November? No! Though they are typically modest, the market still historically has positive returns from May to October1 and part of getting out of the market is knowing when to get back in. In JPMorgan’s Guide to Retirement, it states that $10,000 invested in the S&P 500 from January 1, 2003 to December 30, 2022, would have been valued at around $64,844 at the end of that 20-year period. If an investor missed the 10-day performing days in that 20-year period, the $10,000 would be valued at $29,708, and missing the 40 best days in that 20-year period would have resulted in less money than they started with.3 So stay invested for the long haul and focus on your financial goals!
1 How Accurate Is Sell In May And Go Away? (forbes.com)
2 Should You Sell in May and Go Away? (yahoo.com)
3 Guide to Retirement | J.P. Morgan Asset Management (jpmorgan.com)
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss.