Don’t Sell in May; Take a Seasonal Approach with Technicals Trends

Thinking about selling equities in May and going away? Well, here we offer a different perspective on the old adage discussed in another recent post.  Analyzing seasonal trends in equity and industry sectors can help identify stock categories that could potentially outperform the broad index during the month.  We are encouraged by two sectors’ seasonal tendency to outperform the S&P 500 Index during the month of May over the last 20 years; a month when the index has on average been modestly higher for equity investors, generating positive returns 60% of the time. It should be noted that nonseasonal factors still influence performance and should not be ignored.

The table below highlights sectors’ average over- and under-performance versus the S&P 500 during May since 1997, as well as the top-performing industry groups over the same period:

As detailed in the figure above, the consumer staples and healthcare sectors have shown the best relative strength in May over the past 20 years, but if you’re looking for a more targeted strategy, the second chart within the figure analyzes the industries that comprise consumer staples and healthcare.

Consumer Staples Sector Has Outperformed Broad-Based Stocks by Average of 1.38% Since 1997

While the consumer staples sector has outperformed the S&P 500 by 1.38% on average, with a high of 11.9% and a low of -4.37% since 1997, tobacco, beverages, and food products were the three S&P 500 industry groups that helped drive the sector’s average outperformance.

Healthcare Sector Has Outperformed Broad-Based Stocks by Average of 0.6% Since 1997

Looking at the healthcare sector, it has outperformed the S&P 500 by 0.6% on average, with a high of 7.8% and a low of -3.3% since 1997; with the primary industry drivers of the sector’s seasonal outperformance having been biotechnology, life science tools and services, and health care providers and services.

While the S&P has tended to post positive returns in May, seasonal analysis can help to identify which sectors and industries may fare better, particularly if volatility increases.  Please stay tuned to the LPL Research blog for continued reviews of S&P 500 seasonal patterns and data in the months ahead.



Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Stock investing involves risk including loss of principal.

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.

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

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