Sell in May
Sell in May (and Go Away) is a market adage capturing the historically observed tendency for US and global equity markets to generate lower average returns during the May-through-October period compared to the November-through-April period, suggesting a seasonal pattern in six-month equity performance.
The full adage — sell in May and go away, come back on St. Leger's Day — originated in British financial circles, with St. Leger's Day referring to a September horse race that traditionally marked the end of the London social season and the return of wealthy investors from their summer estates. The US adaptation simply suggests selling equities in May and returning to the market in November.
The empirical basis for this pattern has been documented across multiple markets and extended time periods. Research published by Bouman and Jacobsen in the American Economic Review in 2002 examined 37 countries and found statistically significant seasonal patterns consistent with the adage in many of them. US market data going back to the early 20th century shows that the November-April half-year has historically generated meaningfully higher average returns than the May-October half-year.
Explanations for the pattern remain contested. Vacation-related reduced trading activity in summer, institutional managers deploying capital after fiscal-year starts, and lower corporate earnings activity in the summer months have all been proposed. None of these explanations has achieved consensus status in academic finance.
Important caveats temper the practical usefulness of this observation. Markets have sometimes generated strong returns during the May-October window, particularly during bull markets with strong earnings momentum. Investors who sold in May and missed strong summer rallies paid a high opportunity cost. Transaction costs and tax consequences from selling positions make frequent seasonal rotation expensive. For investors in tax-deferred accounts, the costs of exiting and re-entering the market twice per year must be weighed against any historical seasonal premium.
Like other calendar anomalies, the pattern has likely been partially arbitraged away by market participants aware of it. Historical seasonal patterns are observations, not reliable predictions, and should not substitute for a sound long-term investment framework.