“Sell in May and Go Away”: definition, evidence, and what investors should know

What the phrase means

“Sell in May and go away” is an old market adage suggesting stocks tend to underperform from May through October, and that investors might raise cash or move to bonds over the summer months (May 1–Oct 31), then re-enter equities in November.

Key takeaways

• Historical data show a seasonal tendency: November–April has generally outperformed May–October in many periods and indices, but the pattern is inconsistent across indexes and decades.
• Since 1990, the S&P 500 averaged roughly 6.3% from November–April versus about 3% from May–October. Over longer stretches (back to 1930) the gap narrows.
• The pattern is not reliable enough to guarantee future results; some summers have been the strongest periods (e.g., 2009 and 2020).
• For most long-term investors, staying invested and using dollar‑cost averaging and dividend reinvestment usually beats trying to time seasonal moves.
• If you believe seasonality matters, a lower‑risk alternative is sector rotation (toward defensive sectors in summer) rather than exiting the market entirely.

Evidence and nuance

Seasonal differences in returns exist on average, but they vary by index and era:
* S&P 500 (1990–2023): ~3% average return May–Oct vs ~6.3% Nov–Apr.
* Longer historical windows reduce the gap (e.g., roughly 3% vs 4.5% since 1930).
* Different periods and indices can show the opposite pattern—some decades had stronger summers.
* Individual years can diverge sharply: 2020 saw a ~24% gain in the May–Oct period while the Nov–Apr period was negative; 2009 showed a similar summer outperformance.

Missing just a few strong summer months can materially reduce long‑term returns. For example, a hypothetical $100 invested only during summer months from 1990 would have grown substantially (illustrating that summer returns, while lower on average, still compound and matter).

Why might seasonality occur?

There is no single accepted cause. Possible contributors:
* Lower trading volumes in summer (vacations) that can amplify price moves.
* Behavioral effects and calendar-driven investor activity (tax‑loss selling, reinvestment in January).
* Institutional behaviors such as fiscal‑year rebalancing and window dressing.
* Macro events and the election cycle can override seasonal tendencies (presidential-election periods historically show different patterns).

Why “sell in May” is problematic

• It relies on historical averages that may not repeat; markets change and patterns can be arbitraged away.
• You risk missing large summer gains in individual years.
• Frequent trading to implement the strategy incurs transaction costs, taxes, and lost dividends and compounding.
• The strategy ignores fundamentals and can lead to emotional market timing.

Alternatives to exiting equities

If you want to act on seasonality without leaving equities entirely:
* Sector rotation: move toward defensive sectors (e.g., consumer staples, healthcare) in weaker months and toward cyclical sectors (consumer discretionary, industrials, materials, technology) in stronger months. Research shows defensive sectors have, at times, outperformed May–Oct.
* Use a disciplined allocation or tactical sleeve for seasonal bets while keeping a core equity holding.
* Consider low‑cost ETFs that implement systematic rotation—but check performance and fees carefully. Higher fees can erode any seasonal advantage.

Time in market vs. timing the market

Historical simulations show that simple, consistent investing often beats attempted timing:
* Examples of outcome spread: those who invested regularly or immediately over long periods tended to accumulate more than those who tried to time exact highs/lows.
* Dollar‑cost averaging and staying invested reduce the risk of missing big up‑moves that drive long‑term returns.

Short FAQs

Q: Is there a best month to buy stocks?
A: Historically April and November have been relatively strong months on average, but this changes with the period and index.

Q: Is May the worst month?
A: May has tended to be weaker than many months but is typically second to September as the weakest overall. Many exceptions exist.

Q: What time of day is best to buy?
A: For long‑term investors, time of day is negligible. Short‑term traders prefer market open or close for volatility; buy times in midday can be more stable.

Bottom line

Seasonal patterns like “sell in May and go away” are real in the sense of historical tendencies, but they are inconsistent and can be disrupted by other forces (economic events, elections, changing market structure). For most investors, the costs and risks of trying to time a seasonal exit outweigh the potential benefit. A more practical approach is to maintain a long‑term, diversified core portfolio, consider modest sector tilts if you believe seasonality matters, and avoid frequent market timing.