The adage “sell in May and go away” reflects a historical stock market pattern of weaker returns between May and October compared to November through April. This period is sometimes referred to as the “worst six months” or the “summer doldrums.” A practical application of this observation involves adjusting investment portfolios seasonally, increasing exposure to equities during the historically stronger months and reducing it during the weaker ones.
This seasonal anomaly is believed to have roots in agricultural cycles and pre-modern trading practices. While statistically significant over long periods, its predictive power in any given year is debatable. Factors such as economic conditions, geopolitical events, and market sentiment can outweigh seasonal influences. However, understanding this historical trend can offer valuable context for investment decisions and risk management strategies.
