One of the most popular investment sayings is about to take over the airwaves: “Sell in May and Go Away.” The reason for the concern is that the upcoming six months (from May until the end of October) has historically been the weakest six-month stretch of the year, as our LPL Chart of the Day shows:
It doesn’t end there though, as midterm years tend to exacerbate the weak performance during these six months. In fact, out of the four-year presidential cycle, the next six months have been typically up only slightly on average and higher about a coin flip of the time (53%).
But should you sell in May this year? Maybe not, and here’s why: “If you subscribe to the old axiom, you should also note that the next six months (November 2018 through April 2019) have been the best performing six-month stretch of the presidential cycle. In fact, during five of the past six years, the S&P 500 Index actually gained during the ‘Sell in May’ period—not to mention May has been higher in each of the past five years,” explained Ryan Detrick, Senior Market Strategist. Detrick also noted that “we should not ignore the weak seasonal period ahead, but we should be aware that this investment mantra to sell stocks isn’t gospel. Focusing on modest valuations, impressive earnings, and a very positive technical and sentiment backdrop may be more helpful, as all suggest using any pullbacks as an opportunity for suitable investors to add to equity positions during this potentially tricky period.”
For more on why we don’t think valuations are a major concern, be sure to read our Weekly Market Commentary, due out later today.
IMPORTANT DISCLOSURES
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use — Tracking # 1-725245 (Exp. 04/19)