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.
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