“Sell in May and go away” is a well-known investment adage advising the sale of securities in May and a return to the market in November. This strategy, prevalent in global stock markets, stems from the historical observation that markets tend to perform better from November to April compared to the remaining months. But does this age-old wisdom still hold true in today’s complex financial landscape?
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The “Sell in May” strategy suggests reduced market activity during summer months.
The Origins of “Sell in May”
While multiple theories exist, the most widely accepted origin of “Sell in May” traces back to a 17th-century English proverb: “Sell in May and go away, and come on back on St. Leger’s Day.” St. Leger’s Day, a prominent horse race held in mid-September, marked the social season’s return to London after the summer recess.
St. Leger's Day horse raceSt. Leger’s Day, a historic horse race, is linked to the origins of the “Sell in May” adage.
This proverb reflected the practice of English aristocracy leaving London for summer leisure, returning for St. Leger’s Day and the commencement of a new investment season. The influence of British customs on the then-colonial American economy led some US investors to adapt the strategy, observing it from Memorial Day in May to Labor Day in September.
The Historical Performance of “Sell in May”
Since mid-20th century, the “Sell in May” strategy gained traction, especially in US and UK stock markets. Historical data suggests stronger market performance from November to April compared to May through October.
S&P 500, Dow Jones, and Nasdaq performancePerformance comparison of S&P 500, Dow Jones, and Nasdaq between November-April and May-October (1970-2023).
From 1970 to 2023, the S&P 500 averaged a 6.5% gain between November and April, compared to 1.6% in the May-October period. The Nasdaq and Dow Jones Industrial Average exhibited even larger discrepancies, at 5.9% and 6.9% respectively. Similar trends have been observed in the Vietnamese stock market, with significantly higher returns from November to April.
Historical returns in the Vietnamese stock market further illustrate the “Sell in May” effect.
“Sell in May” and the Cryptocurrency Market
While “Sell in May” holds historical relevance in stock markets, its applicability to the cryptocurrency market remains debatable. The nascent nature of crypto, its high volatility, 24/7 trading activity, and susceptibility to diverse macro and micro factors make direct comparisons challenging.
Market performance is influenced by a multitude of factors beyond seasonal trends. Investors should incorporate fundamental analysis, technical analysis, and continuous market monitoring to formulate comprehensive investment strategies, rather than relying solely on historical adages. “Sell in May” offers a historical perspective, but its effectiveness in the dynamic cryptocurrency landscape requires careful consideration.
