Sell in May and go away?
Is ‘May Go Away’ for real and what do we do about it?
There is a perception that the summer months are notoriously poor for equity markets. The reality is a little different—while they’re not quite ‘as good’ as the late fall and winter months, negative returns haven’t been the rule, either.
The chart below shows month-by-month data for each calendar month from 1926-2013. The returns are scaled/annualized so that the totals add up to the long-term average return of 10.1% over the full year timeframe.
As you can see, equities have experienced a long-term positive bias, which is something we already knew. Additionally, while summer months generally experience lower trading volumes, this isn’t always the case and returns aren’t largely different when looking at random months. We continue to think that valuation (right now, around ‘fair value’ for large-cap equities) is a far superior evaluation technique over time.