Granite Wealth Management

Sell in May and Go Away? Not Anymore

ale Hirsh’s Trader’s Almanac has long been considered a bible for stock traders. Full of useful insights about seasonal trends, cyclical tendencies, holiday patterns and more, we consider it a must for any trader’s bookshelf.

The publication is perhaps most well-known as the source for the famous phrase, “selll in May and go away,” the idea that traders should look to book gains early in the year, then effectively go on vacation until the fall.

Historically, there was great validity to this concept. But is it still true?

Over the last decade, the answer is actually quite clear: no.

The following chart shows only the gains made during the “seasonally favorable” months of November-through April over the past 10 years:

Two takeaways from the chart above are clear. First, growth as represented by the tech-heavy QQQ meaningfully outperformed the broader market. Second, wonderful returns were had by investors during these seasonally favored months, with the S&P returning 135% and the QQQ delivering a whopping 272% gain.

So what about the unfavorable months of May through-October?

The returns for only those months over the last 10 years are shown next:

Remarkably, the returns of this “negative” timeframe are virtually identical to the supposedly favored period: the S&P has returned 137% while the Q’s returned 272%, just like the positive months!

Even though we here at Granite Wealth had observed anecdotally this strategey was losing its shine in recent years, sometimes we still reflexively refer to these two halves of the year as favorable and unfavorable.

But seeing the data is striking.

A related question that interests us currently against this puzzling economic backdrop is growth versus value. In January, we wrote with confidence that growth would surpass value investing this year. Will growth continue to lead in 2023 or has it already run its course?

Due to the market’s rally since our call in October that it was time to buy stocks, next week I will write an update on both the market’s overall technical position and whether growth will continue to lead vs. value.

Stay tuned — and don’t run away from the market just because it’s May!