Sell in May and Go Away; Buy Again on St. Leger Day

September 13, 2017

Shares 32

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.

There is an old adage: “Sell in May, and go away.” Summertime is usually some of the lightest trading months of the stock market. Most traders hate this period of time because trade ranges and volumes shrink. There is hardly any momentum with stocks, and it’s incredibly difficult to make any money.

Some of my friends in the financial industry use the summer to catch up with family along with figuring out which trades they plan to make later in the year.

However, summertime is over now. The kiddos are back in school, summer vacations are coming to an end, and if you live in an area like mine, roadways are congested once again. Since we are moving into the fall, I’ve traded in my leisure summer reading for articles surrounding stock market news.

While doing so, I came across the saying, “Sell in May and go away; buy again on St. Leger Day.”

But, what is St. Leger Day?

St. Leger Day

Well, it appears that St. Leger Stakes is the oldest horse race, established in 1776. It is the final leg of the English Triple Crown. It is also the traditional end of the summer season in England, occurring on September 16th this year.

So why does this matter?

Monthly Market Returns

Since 1950, the US stock market has returned 0.34% on average between May and October. In contrast, the US stock market has returned 7.48% between November and April.

I had no idea that November through April were such great months while the rest of the year did so paltry in comparison. But here is the really eye-opening part. According to Jeff deGraff, head of Renaissance Macro Research, September is “the only month of the year that has statistically significant negative returns.”

Since 1950, the S&P 500 has averaged a decline of 0.50%, while the Dow Jones has declined 0.80% on average, and the Nasdaq has declined 0.50% on average, all in the month of September.

September is an awful month historically.

Why September Has Yielded Such Bad Returns

Some extraordinary events have taken place in September. We’ve had the tragedy of 9/11, the Lehman Brothers bankruptcy, the peak of the Dow Jones Industrial in 1929 before it crashed in October, and George Soros breaking the bank of England when he bet against the British pound, causing Black Wednesday, in 1992.

These events have caused September to be an interesting month for the market. And, this year, September could also be a wild month.

Congress is returning from a summer recess. There will be fights over the debt ceiling, a potential federal government shutdown, and who knows what else is in store for us.

How Should This Affect Your Investing

As most of you know, I am not a fan of timing market, let alone, seasonally timing it. For instance, timing the market by “selling in May” this year would have rid you of the 3.87% rise in the market.

Of course, September and October could be rough months that might make you reconsider the position. It’s clear that just because the market reacts one way historically, it doesn’t necessarily dictate future behavior.

Yes, we can look at the past to understand why things happened and analyze patterns. However, using past performance to predict future performance is simply futile.

So readers, were you familiar with this old adage? Do you do seasonal trading? Share your thoughts below.