US Stock Indexes: “Sell in May and go away”?

• History suggests S&P 500 investors gain less in May-Oct than in Nov-Apr
   
• But S&P 500 averaged 2.4% monthly gain over past 10 Mays, only fell in May 2019
   
• Now: US500 erased all losses since Trump’s April 2nd tariff announcement
   
• US stock indices rising today after stellar Microsoft, Meta earnings
   
• Next 7 days: Apple & Amazon earnings, US jobs report, Fed rate decision

 

“Sell in May and go away”.

Come this time of the year, you’re likely to see this phrase resurfacing across markets.

 

What does it mean?

The idea is that investors tend to:

1. sell US stocks starting May
2. stay away through October
3. only return to buy in November
4. hold through April

 

Why?

Seasonally, the returns from the S&P 500 during the May-October period pales in comparison to the returns from the November-April period.

According to the Stock Trader’s Almanac, over the last 74 years:

• May - October: 35% returns on S&P 500 for the period
   
• November – April: 11,657% returns on S&P 500 for the period

 

Using a more recent timeframe, according to Bespoke Investment Group, since 1993:

• May - October: 171% returns on S&P 500 for the period
   
• November – April: 731%: returns on S&P 500 for the period

 

In short, investors historically stand to gain more from buying in November and holding through April, as opposed to buying in May and holding through October.

 

Does this mean the S&P 500 falls between May – October?

Nope.

To be clear, it doesn’t mean that the May-October period is devoid of returns.

Here’s the S&P 500’s average monthly performance over the past 10 years (May-Oct):

• May = up 1%
   
• June = up 1.1%
   
• July = up 3.3%
   
• August = up 0.1%
   
• September = down 2%
   
• October = up 1.3%

In fact, over the past 10 years, the S&P 500 posted a monthly advance every single May except once - in May 2019.

 

Also, those who adhere to the “sell in May” mantra would miss out on the 3.35% average monthly gain in July over the past decade.

July's average climb is second only to November’s 4.14% monthly average advance.

Granted, the S&P 500’s average September decline of 2% from the past decade, also falling in 6 out of the past 10 Septembers, seemingly reinforces the “sell in May and stay away” narrative.

While market participants may yet choose to adhere to the “Sell in May” mantra in May 2025, they risk leaving some “buy and hold” returns on the table, or even short-term trading opportunities.

In fact, investors who just bought and held the S&P 500 since 1993 would have gained 2,100%!

 

Key events coming up

Here are some key events to look out for over the next 7 days:

• May 1st (after US markets close): Apple and Amazon to release respective quarterly earnings
   
• May 2nd: US April jobs report (a.k.a. nonfarm payrolls a.k.a. NFP)
   
• May 7th: Federal Reserve (FOMC) rate decision (markets predict a 73% chance of a Fed rate cut in June)

 

Potential Scenarios

The US500 index, which tracks the S&P 500, could soar towards its 200-day SMA / 5800 level if:

• Apple and Amazon post better-than-expected earnings and cite confidence that its future earnings remain intact despite the threat of a global trade war
   
• US jobs market remained resilient last month, or perhaps even weakened substantially to warrant a sooner-than-later Fed rate cut
   
• Fed Chair Jerome Powell cites the growing possibility of a US rate cut in June

Otherwise, the US500 may yet tumble back down to the 5400 level or its 21-day SMA in finding support.

 

Trump’s tariffs remain key consideration in May 2025

Of course, markets remain attentive to the latest developments surrounding US President Trump’s already-erratic tariff rollout, and the responses out of major economies (China, EU, etc.)

Riskier assets, including the US500, may unwind some of its recent rebound if markets think there’s a good chance of a US recession, especially if tariffs are set to move higher and stay elevated for longer.

If so, then such risk-off moves may yet prove true the “Sell in May” adage.

 

Looking at the charts ...

US500 bulls (those hoping prices can move higher) are likely cheering the fact that this US stock index is trading above its 50-day simple moving average (SMA) for the first time since February.

The 17.5% rebound since that one-year low on April 7th is also offering green shoots of optimism.

Perhaps more notably for bulls ...

The US500 has now erased all of its declines since US President Trump's "Liberation Day" tariffs announcement on April 2nd, 2025

Regardless, it's still early days - only just May 1st.

There's bound to be many twists and turns ahead for markets during this May - October 2025 period.

Only time will tell if those who "sold in May and went away" proved prudent or missed out.

Still, bouts of volatility could prove bountiful for short-term traders who are alert enough to capitalise on big price swings in the US500, and potentially across other assets as well.