As we mentioned last month, despite May’s reputation as being a time to sell, other months — June, August and September, in particular — historically produce much worse equity market performance. June is a particularly poor performer, averaging negative performance in both the Dow Jones Industrial Average and the S&P 500.
April is historically a strong month for equities. It is the best performing month for the Dow Jones Industrial Average, third best performing month for the S&P 500 and fourth best for the Nasdaq Composite Index. It also represents the end of the best six-month period in the market. This is where the “Sell in May and go away” strategy comes from.
March appears to be a relatively non-distinct month on the trading calendar. It is not in the bottom or top quartile of performance metrics in any of the top three equity indexes. It lands at fourth best in the S&P 500, fifth best in the Dow Jones Industrial Average and sixth best in the Nasdaq Composite.
February is the shortest month of the year and there is no specific market insight to it such as the Santa Claus rally or January effect. It is one of the poorer performing months in all three major indexes: number eight in the Dow Jones and Nasdaq Composite and number nine in the S&P 500, but averages moderately positive returns in the Dow and S&P with a more robust 0.73% in the Nasdaq.
The old adage to “sell in May and go away” has not held in recent years. In fact, May has produced positive performance for four consecutive years in all three major indexes. That is the strongest run in May since the heart of the bull market when the S&P 500 produced 13 consecutive positive returns in May from 1985 through 1997.