As you probably know, “Sell in May and go away’ states that the stock market is seasonally weak from May – September. We already demonstrated that it isn’t as weak as investors think in this study.
Some investors believe that May-September is not seasonally bearish IF…
- The stock market falls from January – April, AND…
- There’s no recession that year (a recession in 2018 is highly unlikely).
Are they right? Let’s look at what happens next to the U.S. stock market from May-September when
The S&P falls from January – April…
And the S&P isn’t in a recession that year (a recession in 2018 is highly unlikely)
Here are the historical years.
- 2018 (present case)
Here’s what happened next
- 4 cases went up
- 3 cases were flat
- 4 cases where down
From October – December:
- 7 cases were up
- 1 case was flat
- 3 cases were down
As you can see, “sell in May and go away” is neither consistently bearish nor bearish. It’s random. The probability of the stock market going up from May-September = the probability of the market going down from May-September. It doesn’t matter what the S&P was doing from January – April.