Sell in May and Go Away? May gives us "Star Wars" Day ("May the 4th be with you"). Then there's Cinco de Mayo, Mother's Day and Memorial Day - the official start of one of my favorite seasonal investing trends, beer drinking season, as well as summer driving season. None of those holidays are as lucrative as Easter, Thanksgiving or Christmas. Nor are they particularly disastrous. So why the market hatred for May? Summer vacations. The "Sell in May" concept originated in England at a time when aristocrats, bankers and other wealthy elites would flee the suffocating heat of London to summer in the countryside. The adage carried over to the U.S., where most people take vacations between May and September. Investors, the adage says, pare back their exposure to the markets in these months by having their money take a vacation as well. This leads to a summer lull in the markets as volume sputters to a trickle. Things don't normalize again until after the summer ends and children go back to school. For decades, the theory seemed efficient enough. From 1950 to 2013, the Dow averaged a 0.3% return from May to October and a 7.5% gain from November to April. And when we look at the stretch of average monthly gains for the Dow since 1998, the period from May through September doesn't look very promising. Three of the four worst months of the year for stocks occur in that five-month span. And since 1998, the Dow has averaged a loss of 0.73% from May to October. But a lot of the damage came between 1998 and 2011. In the nearer term, the story is a lot different. Since 2012, the average return of the Dow between May and October has been 3.48%. We live in a modern world. With the broader adoption of smartphones, people are connected to the markets 24/7, year-round. Even on vacation, they can place trades. And that reality has poked holes in the "Sell in May" maxim. May's Mayhem May can be full of turbulence. The looming shadow of "Sell in May" hangs over it. And first quarter earnings wind to a close in the month, meaning we enter a quiet period at the company level until second quarter earnings begin in late June. So it shouldn't come as a surprise that May is prone to some exceptionally steep drops. But the Dow has ended May with a loss only 11 times since 1993. That means blue chips end the month with a gain 62.1% of the time. The reality is, January, June, July, August and September are far worse months for stocks than May. And since 2013, the Dow has ended May with a loss only once. That said, we can see that when stocks do fall in May, they tend to fall hard, particularly since 2010. The month has seen three losses of more than 6% during that decade and change. Historically, May marks the beginning of a very difficult stretch for investors. A lot of that has to do with the impact of money managers, Wall Street executives and average Americans heading off on summer vacations, as well as the cyclical nature of industries like retail and shipping. But those industries aren't very large components of the major U.S. indexes anymore. And since smartphone adoption crossed 50% in 2013, summer vacations have no longer weighed on markets as they once did. Because May is also a month for buying. It's the start of some profitable trends in industries that take off in summer, like beer and travel. So investors shouldn't be looking to sell in May and go away. They should be looking to rotate into the sectors that are heating up for the summer. Here's to high returns, Matthew P.S. I'll be talking about one such hot summer trend in my upcoming event, the Oxford Options Accelerator, on May 5. You can find out my favorite ticker symbol to trade options on in the coming months... for FREE. No credit card required! Details here. | 
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