Have you ever heard the old investment saying, “sell in May, stay away”? It’s an old saying from the Stock Trader’s Almanac in the early 20th century. It is based on the idea that stock returns from May 1-October 31 generally trail the returns from November 1-April 30.

It’s such a cute saying—but does it hold up?

Sort of. If you look at the data for the S&P 500 Index from 1928 to the present, returns from May 1-October 31 average 2.3%, equal to an annual rate of return of 4.6%. Meanwhile, from November 1-April 30, the S&P 500 has averaged an increase of 5.3%, or an annual rate of return of 10.6%. These figures are from the Dow Jones Market Data, and do not include dividends.

In isolation, the numbers support the saying. But in the real world, things are messier. In 2023 the S&P 500 saw a rise of 15% from May-October, and a drop of 5% from November-April, per Fidelity. That’s hardly a reason to “sell in May”. We are also currently facing ever-changing tariffs and unknown economic policies. It is very hard to predict if the factors that have caused this historical phenomenon of lower returns from May-October continue today, and if they are strong enough to overcome the current influences on the markets.

All of this begs the question: how should it impact our investment behavior if we expect the trend to continue?

When you take the 2.3% average for the down months and add another 1.5% to represent a fairly average historical dividend payout for 6 months, you get a return of 3.8%. Double that, and you’ve earned a 7.6% rate of return for a 12-month period. In other words, the so-called ‘bad months’ can still produce a respectable return—so before you sell, you’d need to find an alternative investment that’s both safe and liquid enough (able to be sold quickly and easily) to beat it.

If you sell everything on May 1st, what can you do with that money to earn an average return of 7.6%? Not much. Real estate or private equity might average that or more, but there’s typically not much liquidity. You probably won’t be able to sell those investments in November, when you want to reinvest your money back into the market.

You won’t want to put your money in the bank or into CDs, either, if your goal is to earn more than 7.6%. Neither of those is likely to net you 7.6% unless we have quite a large increase in interest rates. Holding cash? That won’t do it.

As usual, the conclusion is that investors are likely to be better off buying and holding their equities, rather than trying to time the markets. Consistency over the long run is rewarded time and again, while evidence shows that timing the market often leads to lower returns.

Be patient. Don’t sell everything in May just because it’s May, but maybe log out of your trading app for a few weeks and stress a bit less. If you’ve set up a strong portfolio, give it time to work for you.

However you choose to live your seasons, invest smart and invest well!

Larry Sidney is a Zephyr Cove-based Investment Advisor Representative. Information is found at https://palisadeinvestments.com/ or by calling 775-299-4600 x702. This is not a solicitation to buy or sell securities. Clients may hold positions mentioned in this article. Returns are not guaranteed and past performance does not guarantee future results. Consult your financial advisor before purchasing any security.