Sell in May: Major stock market summer returns revealed
Do you have to sell in May? Summer returns for all the world’s major stock markets revealed
- ‘Sell in May and go away’ is one of the most famous sayings in the financial world
- It is well supported by analysis of the world’s major indices over a 50-year period
“Sell in May and go away” is one of the most famous sayings in the investment world, and new data shows there may be some truth to it.
The phrase harkens back to when the town was essentially closed for the summer and wouldn’t return until St Leger Day in September – a date that refers to a horse race rather than a saint’s day.
Supporters of the investment theory believe the summer months are more prone to market disruption, although commentators have expressed some skepticism in recent years.
‘Sell in May, and go away’ encourages investors to sell their holdings in early summer and leave their portfolios untouched until September
However, analysis by eToro shows that there may still be some truth to it.
The monthly average price return between November and April of 15 of the world’s largest indices is 1.2 percent over 50 years.
In contrast, according to eToro’s analysis, there was only an average monthly return of 0.09 percent in the months between May and October.
December often has higher-than-average returns, in a phenomenon nicknamed the Santa Rally.
Although there is a seasonal difference in all 15 markets, domestic stocks seem to have more volatile summer months than global stocks.
The FTSE 100 has averaged a monthly return of 1.09% from November to April, while it has averaged a monthly return of -0.04% in the summer.
The FTSE 250, which is more closely linked to the UK economy, posted an average monthly return of 1.56% between November and April, but a negative return of 0.14% in the summer months.
The Italian and French indices have also experienced significant price seasonality. Italy’s FTSE MIB returned 1.08 percent monthly in the colder months, but fell to -0.71 percent in the summer.
The French Cac-40 returned -0.24 percent in the summer, while it recorded a monthly average of 1.54 percent in the winter.
In contrast, the Nasdaq averaged 1.44 percent in the winter and 0.68 percent in the summer, while the S&P 500 returned 1.05 percent from November to April and 0.27 percent from May to October.
Korea’s Kospi and Australia’s ASX200 have also seen smaller differences between seasons.
| Table of contents | Average monthly return in May-October | Average monthly return in November-April | Difference |
|---|---|---|---|
| US S&P 500 | 0.27% | 1.05% | 0.78% |
| US Nasdaq composite | 0.68% | 1.44% | 0.76% |
| USA Wilshire Small Cap | 0.37% | 1.33% | 0.96% |
| Canada TSX | 0.07% | 1.14% | 1.07% |
| UK FTSE 100 | -0.04% | 1.09% | 1.14% |
| British FTSE 250 | -0.14% | 1.56% | 1.70% |
| German dax | 0.05% | 1.22% | 1.16% |
| France Cac-40 | -0.24% | 1.54% | 1.78% |
| Swiss SMI | 0.26% | 0.91% | 0.65% |
| Italy FTSE MIB | -0.71% | 1.08% | 1.80% |
| Spain IBEX | -0.13% | 1.14% | 1.27% |
| Hong Kong HSENG | -0.15% | 1.43% | 1.58% |
| Japanese Nikkei 225 | -0.19% | 1.25% | 1.44% |
| Korea KOSPI | 0.26% | 0.91% | 0.65% |
| Australia ASX200 | 0.06% | 0.89% | 0.83% |
| Average | 0.09% | 1.20% | 1.11% |
| Source: eToro using Refinitiv pricing data | |||
Selling in May may be tempting for investors looking to capture some of the post-2022 recovery.
But trying to time the market is notoriously difficult and most experts recommend that investors stay the course, hoping to take advantage of the time in the market.
“The historical data shows us why the adage of ‘sell in May’ has held up for so many years. While some may think it’s now a self-fulfilling prophecy, there are several key drivers behind this seasonal trend,” said Ben Laidler, eToro’s global markets strategist.
“First, we have the typical fourth quarter investor repositioning for the year ahead and ahead of January’s well-known price effect. Then the generally positive business outlook for Q1 Q1, which may improve investor sentiment. While the summer months then suffer from the lack of these positive factors, in addition to typically lower trading volumes.
“However, we must remember that history does not always repeat itself and that we are experiencing an extraordinary period in the financial markets. With rate hikes almost over and many of the major economies still avoiding recession, 2023 has the potential to break the sell in May trend.”