Should you sell in May and go away?

published 8 May 2009

Here's some "food for thought" for those mulling over the old adage "sell in May", says John Mauldin on Investorsinsight.com. Between 1950 and April 2009, the November-April period has certainly been a better bet than the other six months of the year.

In an average year, the winter has produced a total return of 7.9%, compared with 2.5% for the summer months. But since 1950, US stocks have been through two long-term bull runs (around 1950-1966 and 1982-1999) and two bear markets (1966-1982 and an ongoing one that started in 2000).

Look at the seasonal pattern in the bear phases (so 1965-1982 together with 2000-April 2009) and it's interesting to note that the May-October period is particularly "ugly". The average return over this period is -0.3%, compared with 4% in the winter time. Yet another reason for caution.