Seasonal Analysis: “All Things Seem Possible in May”

The great American naturalist Edwin Way Teale wrote, “The world’s favorite season is the spring. All things seem possible in May.” Investors often have a more pessimistic perspective heading into the spring and summer seasons as the “sell in May and go away” axiom suggests; however, equity market seasonal analysis may help brighten your perspective.

The S&P 500 Index has historically been flat to modestly higher in May over the past 20 years; the index has gained 0.1% on average, with stocks moving higher this month 60% of the time for the period reviewed. When May has generated positive returns for the S&P 500, the average magnitude move higher for the month has been 2.3%; and when negative, the average return has been -3.3%. On balance, May can be a hit-or-miss month for equity returns, with a slightly higher track record to the upside.

Considering the potential for modest returns on the broad index, our seasonal analysis in LPL Chart of the Day highlights specific sectors and industries that could be poised to outperform the index in May and potentially benefit your overall portfolio strategy. Importantly, nonseasonal factors still influence performance and should not be ignored.

A variety of sectors have on average tended to exhibit relative strength during May, with the consumer (consumer staples and consumer discretionary) and healthcare consistently outperforming the index (i.e., greater than 55% of the time). However, if you are interested in a more targeted strategy, you may consider industry-level investments like the food & beverage and tobacco groups, which have posted the highest average relative returns, with a greater frequency of outperformance; or the healthcare equipment & services industry, which has significantly outperformed the index in May over the past 20 years.

As we begin our journey into summer and welcome the variability that May offers, incorporating seasonal statistics as part of your portfolio management plan may be one way to help navigate potential lackluster equity market returns. However, while defensive equities have tended to provide a measure of relative outperformance—specifically in May—we remain confident in U.S.  economic- and earnings-growth prospects and recommend suitable investors continue to overweight cyclical areas of the U.S. market in their equity allocation.



The Standard & Poor’s 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.

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