Categories: Base Metals / General Market Commentary / Precious Metals
Topics: General Base Metals / General Market Commentary / General Precious Metals

3 Reasons Not to Sell in May and Go Away

“Sell in May and go away” may be an old trading adage, but it still has undeniable appeal today. 

The strategy is based on the idea that investors should get out of the stock market in May — presumably to head to the beach — and then return in November. Those “summer” months are typically more volatile, and many believe it’s easier to take a break during that time than to deal with potential uncertainty.

It’s definitely possible to see success by following that advice. One oft-cited statistic is that since 1950 the Dow Jones Industrial Average (INDEXDJX:.DJI) has had an average return of only 0.3 percent from May to October compared to an average gain of 7.5 percent from November to April. Pretty impressive!

But is “sell in May and go away” always good advice? Some would argue that the answer is “no.” Below we’ve laid out three reasons why you may want to reconsider an investing vacation this year.

1. It’s not the third year in a presidential term
While choosing to “sell in May and go away” can be lucrative, a study published earlier this year shows that the approach is more successful in some years than in others.

The study is complex, but The Wall Street Journal’s Mark Hulbert sums it up succinctly in a February article: “there is evidence that the phenomenon of stocks performing better in winter than in summer does tend to occur. However, almost all of the advantage comes in the third year of presidential terms. Otherwise, the seasonal difference is so weak as to be statistically nonexistent.”

Still confused? Hulbert spells it out further by noting that the Dow rose in three of four summers during former US President Barack Obama’s second term, with the third summer being the exception. He explains, “there is no reason to get out of stocks most summers — including this coming one.”

2. Macroeconomic indicators are positive
A number of analysts have pointed out that 2017 also differs from some other years in that macroeconomic indicators have been positive leading up to May.

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