Sell in May

I have been researching the topic of Sell in May and Go Away, the topic for this week. Also, I am still offering to match contributions to the Relay for Life, please consider supporting cancer research as we probably will all need it as we get older. At the end are some quotes on aging for your enjoyment.


Vanguard

Economic activity continued at a modest pace, as data revealed growth was both diverse and consistent nationwide. For the week ended April 13, the S&P 500 Index fell 2% to 1370.27 (for a year-to-date total return—including price change plus dividends—of about 9.63%). The yield on the 10-year U.S. Treasury note fell 5 basis points to 2.02% (for a year-to-date increase of 13 basis points).


Sell in May Revisited

While reading the 2012 Stock Trader's Almanac, I found an interesting chart that pertains to this topic. This same information was in the April 16, 2012 Barron's magazine.

The information is the value of the S&P 500 index starting on April 30, 1945 through the end of September 2011. $100 was invested on April 30, 1945 and divided into 2 periods: the beginning of May to the end of September and the beginning of October to the end of April. If this $100 was invested only during the period of May - September this amount declined $1 to a value of $99. If this $100 was invested only during the period of October - May this amount grew to a value of $9,329.

While the spring and summer time period was relatively flat the fall and winter period was very volatile with both large gains and large declines. I remember a few Octobers that were very painful. October has traditionally been the month when rallies begin.

So what is the bottom line? The data suggests that during the May - September period reducing the amount of stocks and increasing the amount of bonds seems prudent.


Aging

You know you're getting old when you stoop to tie your shoelaces and wonder what else you could do while you're down there.
George Burns

People ask me what I'd most appreciate getting for my eighty-seventh birthday. I tell them, a paternity suit.
George Burns

I don't feel old. I don't feel anything until noon. Then it's time for my nap.
Bob Hope

I don't plan to grow old gracefully. I plan to have face-lifts until my ears meet.
Rita Rudner

I do wish I could tell you my age but it's impossible. It keeps changing all the time.
Greer Garson

I'm very pleased to be here. Let's face it, at my age I'm very pleased to be anywhere.
George Burns

Except for an occasional heart attack I feel as young as I ever did.
Robert Benchley

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.