Investors have long been familiar with the adage, “Sell in May and stay away,” which suggests that they should reduce their market exposure after April and return later in the year, typically around October or November. However, recent trends in the S&P 500 indicate that this strategy may no longer hold the same weight it once did.
Historical data from the S&P 500 indicates a shifting seasonal performance landscape. Between 1928 and 1941, a period that encompassed the onset of the Great Depression and the early years of World War II, the months from May through August were, surprisingly, among the strongest in terms of returns. The years from 1942 to 1959 demonstrated a different picture, where all three segments of the calendar produced positive returns, indicating a more balanced market environment.
The slogan found its strongest support from 1960 to 1987, a time marked by significant economic volatility, including inflation shocks, aggressive interest rate hikes by then-Federal Reserve Chairman Paul Volcker, and the stock market crash of 1987. During these years, the performance of the S&P 500 from May to August was minimally positive, suggesting a period of stagnation for investors who chose to remain in the market during those months.
However, since 1988, the dynamics of investing have evolved considerably. The proliferation of retirement accounts, index funds, and exchange-traded funds has fundamentally altered how and when investors commit capital to stocks. In this modern context, the “sell in May” mantra appears to have lost its effectiveness, with positive returns becoming the norm across all three calendar segments.
The trend has continued in recent years, with data highlighting that May has been a favorable month for investors, posting gains in 12 out of the last 13 years. Furthermore, analysis by Ryan Detrick of Carson Group emphasizes a strong correlation between positive early-year performance and the likelihood of continued gains for the remainder of the year. In fact, when the S&P 500 has experienced an increase exceeding 5% through April, the subsequent months have historically finished higher in 23 out of the last 25 instances.
A closer examination of S&P 500 performance from 1988 to 2025 reveals that May has averaged a gain of around 1.2%, placing it among the stronger months of the year. Notably, August and September stand out as the only months to post negative average returns during this timeframe.
For investors contemplating a summer hiatus, the implications of this data suggest a shift in perspective. Instead of adhering to the traditional “sell in May” advice, a more prudent approach may be to consider hedging during the month of May before taking any extended breaks from the market. As the landscape of investing continues to evolve, strategies based on historical patterns may warrant re-evaluation in light of contemporary data.
