Sayings like these give journalists topics to write about. Pro tip: Most of the stuff you’ll read is garbage.
“Sell in May and go away, and come back on St. Leger’s Day”
That’s where all this Sell in May stuff came from in the first place. The inference here is that there is no point trading in the summer. All the brokers and fund managers will be out in the Hamptons working on their tans. The original saying suggests that the big boys won’t get back to business until Horse Racing season in England is over in the Fall. The British have been celebrating this day in September since the St. Leger Stakes, last leg of the English Triple Crown, was established in 1776. We Americans like to call this time of year, “Football Season”.
The reason we still look at this today is because through 2016, all of the gains in the Dow Jones Industrial Average since 1950 had come between the months of November and April. In other words, had you bought the Dow every May 1st and sold on Halloween every year since 1950, you would have actually had a negative return. The past 2 years have turned this number slightly positive but I think you get the point. We traditionally see underperformance in what the Stock Traders Almanac refers to as the “Worst 6 months”.
Does this mean we should sell our stocks every May 1st?
No. [Read more…]