Sell in May and Go Away

The topic is the saying Sell in May and Go Away. The first section is from Vanguard.

Vanguard

The U.S. is on the mend from the recession and financial crisis, but while the repairs are evident, the workers aren't yet ready to pack their tools and take down the scaffolding. The economic situation is serious enough that Fed Chairman Ben Bernanke held the first-ever news conference for the Federal Market Open Committee (FOMC) in addition to releasing a customary statement. Overall, the economic news this week was mixed. Real gross domestic product (GDP) grew at a slower pace in the first quarter than it did in the fourth quarter of 2010. Consumer confidence and the housing market are slowly improving, but still not at levels considered healthy. The stock market surged on good news and shrugged off the bad. For the week ended April 29, the S&P 500 Index rose 2.0% to 1,364 (for a year-to-date total return—including price change plus dividends—of about 9.1%). The yield of the 10-year U.S. Treasury note decreased 10 basis points to 3.32% (for a year-to-date increase of 2 basis points).

Sell in May and Go Away

This is a saying for investors in stocks to sell all stocks on May 1st and repurchase them at the end of September to avoid the summer lull in the stock market. It is a saying to tell people how to time the market. If you look at the average return for these months compared to other months it does suggest that the stock market is calmer during these 5 months.

However, if you analyze the monthly return data for these month you will find that the variability is greater than the average return. This means statistically this saying has no real value and this saying should be avoided. The best thing to do is invest in stocks as the economy is growing and ignore this saying.