What Is 'Sell In May and Go Away'?

'Sell in May and Go Away’ Explained

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Definition
If you "Sell in May and Go Away," you will exit the stock market in May, wait things out over the summer and early fall, then buy back into stocks come November.

In a sea of stock market-related calendar effects, “Sell in May and Go Away” ranks right up there with the Santa Claus rally in popularity. This expression refers to the strategy of liquidating your stock positions in May, presumably going on vacation over the summer, then re-entering the market in November. 

Find out more about why this approach took hold or at least gets mentioned frequently in the financial media. We’ll consider research that analyzes the reliability and effectiveness of a Sell in May and Go Away strategy. Then learn the significance of Sell in May and Go Away for individual investors. 

Definition and Example of ‘Sell in May and Go Away’

If you Sell in May and Go Away, you will exit the stock market in May, wait things out over the summer and early fall, then buy back into stocks come November. 

Note

This strategy—now stock market lore—gained attention because of data on seasonal stock market performance

Since 1945, the Standard & Poor’s (S&P) 500 has returned, on average, 2% between the months of May through October. However, the same index produced an average gain of 6% between November and April. In more recent years, since 1990, these return figures have basically stayed the same, at 3% and 7%, respectively.

  • Alternate name: the Halloween Indicator

You’ll often hear Sell in May and Go Away mentioned alongside or interchangeably with “the Halloween Indicator.” This term came to be simply because if you follow the Sell in May and Go Away strategy, you’ll get back into the stock market in early November, right after Halloween. 

Setting an example that probably doesn’t apply to most people, this approach is thought to have originated centuries ago in the U.K., when wealthy investors would leave the stock market in May to spend their summers in the countryside, not paying much attention to their investment portfolios again until fall. 

The modern-day equivalent would be large investors, such as hedge fund managers, fleeing New York City for the summer to head to the Hamptons. But given the emergence of the internet and 24/7 trading, this summer-break effect might not be as pronounced as it once was when traders spent the majority of their working hours in places such as the floor of the New York Stock Exchange or a Manhattan office building. 

How ‘Sell in May and Go Away’ Works

For the rest of us, following a Sell in May and Go Away plan would simply entail exiting our positions during this period of historical relative market underperformance between May and October and re-entering the stock market sometime shortly after Halloween. 

But, not so fast. As with most things trading and investing, there are both nuances and other factors to consider. 

Do I Need to Sell in May and Go Away?

At the end of the day, Sell in May and Go Away is just another attempt to time the stock market. While it can work, it might be more trouble than it’s worth, particularly if you’re a long-term investor.

Before we review some history, consider some history that’s still fresh. In May 2021, J.P. Morgan Wealth Management advised against Selling in May and Going Away. 

Here’s the firm’s rationale, published May 26, 2021:

“[T]he summer months of 2021 should be anything but lackluster. The historically weak seasonal stock market performance may be overruled by the gains driven by the economic reopening, prompted by a federal stimulus, the Federal Reserve’s easy money policy, rising vaccination rates, falling COVID-19 cases, and rising Treasury yields.”

A look at how the S&P 500 performed between that May date and the end of October 2021 shows that J.P. Morgan made the correct call. 

The main exchange-traded fund (ETF) that tracks the S&P 500 index, the SPDR S&P 500 ETF Trust, commonly known as SPY, closed at 419.07 on May 26. SPY ended October at 459.25, for a gain of 9.6%.

This significantly outperformed the S&P 500’s historical annual average return of 3.3% between May and October since 1990. Also since 1990, the S&P 500 generated an average return of 8.3% between November and April.

Add to this seminal research from the Netherlands in 1998 that found better stock market performance between November and April than between May and October in 36 of the 37 markets the study analyzed.

A 2017 paper out of George Fox University in Oregon produced similar results regarding performance between the two periods but suggested a relatively aggressive strategy of shorting the stock market into summer and going long again come fall. However, the researchers conclude that the Sell in May and Go Away theory is little more than a “self-fulfilling prophecy,” given that traders and investors already anticipate a summer downside followed by a post-Halloween upside.

Note

As 2021 showed, sometimes circumstances matter more than an alternative strategy. You could miss out on significant gains if you sit out a summer where the stock market performs well. 

In fact, between 2010 and 2020, you only would have benefited by Selling in May and Going Away in the year 2011. In every other year of that decade, you would have outperformed the market by somewhere between 0.8% and 13.9% by staying invested from May through October.

Additionally, you might not hold investments in broad indexes such as the S&P 500. As Fidelity points out: “…since 1990 there has been a clear divergence in performance among sectors between the [two] time frames—with cyclical sectors easily outpacing defensive sectors, on average, during the ‘best [six] months.’

“Consumer discretionary, industrials, materials, and technology sectors notably outperformed the rest of the market from November through April. Alternatively, defensive sectors outpaced the market from May through October during this period,” according to Fidelity.

While the firm suggests investors consider “sector rotation” based on this data, it urges caution and close consideration. Fidelity suggests it might make more sense to let go of winners come May that you don’t want to hold for the long haul and to use those profits to stick to your original investment strategy. 

J.P. Morgan gives essentially the same advice, warning that the tax consequences of moving in and out of positions so frequently could reduce any profits you realize by Selling in May and Going Away.. 

Key Takeaways

  • Sell in May and Go Away refers to a longstanding stock market strategy of liquidating your positions in May, taking the summer off from trading the portfolio, and re-entering the stock market in November. 
  • Because this strategy entails buying back stock just after Halloween, it is also known as the Halloween Indicator. 
  • While there is historical evidence to support higher stock market returns between November and April than between May and October, recent results indicate you’re better off staying invested in the stock market over the summer months. 
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Fidelity. “Should You ‘Sell in May’?” Accessed Dec. 24, 2021.

  2. J.P. Morgan Wealth Management. “Why You Shouldn’t ‘Sell in May and Go Away’ This Year.” Accessed Dec. 24, 2021.

  3. Yahoo! Finance. “SPDR S&P 500 ETF Trust (SPY).” Accessed Dec. 24, 2021.

  4. Ben Jacobsen and Sven Bouman. “The Halloween Indicator, ‘Sell in May and Go Away”: Another Puzzle.” American Economic Review. Accessed Dec. 24, 2021.

  5. Robert Lloyd, Chengping Zhang, and Stevin Rydin. “The Halloween Indicator Is More a Treat Than a Trick,” Page 1. Accessed Dec. 24, 2021.

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