It’s an old investment adage – sell in May and go away, don’t come back until St Leger’s Day’ – a well-known British horse race day, which takes place in September. But does the ‘sell in May’ theory still hold true?
The saying is thought to date back to an edition of Stock Trader's Almanac from the 1950s. In those days, financial professionals would typically spend most of the summer on holiday. Those left would have to contend with drifting markets during the summer months. The issue wasn’t so much that stocks would fall over the summer, but that they wouldn’t do a whole lot at all.
As such the adage seems to have developed among professional traders who rely on volatility in order to turn profits. It was viewed as best to sell your stocks in May, sit the summer out, then re-enter the market when activity picked up again in September.
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“It probably applies more to professionals than it does to retail investors,” says Chris Beauchamp, chief market analyst at IG Group.
The theory may have had legs when trading was conducted in-person, but does it still apply today? In a world where trading is largely digital, there is presumably far less of a drop-off over the summer.
And as any good investor will tell you, it is all about time in the market, not about timing the market. So, does it still make sense to sell in May?
Do stock markets underperform over the summer?
It’s questionable whether or not there’s any empirical evidence to support selling your shares in May. Various studies have looked into the results, and between them they paint a fairly blurred picture.
Fidelity International, for example, found that selling stocks in May generated positive returns in just 14 of the last 38 years. Investopedia investigated the trend going back to the 1930s and while it found that summers have generally yielded higher returns than winter since the 1950s, the opposite was true for the two decades before then.
Part of the problem is that each of these studies has a different basis – the exact months in question, for example, and how long we consider the “summer” to be. Some approaches divide the year into two six month chunks (November to April and May to October), but if you follow the old adage that references St. Leger’s Day, you’d be out of the market for four and a half months at most.
It also depends on the particular stocks in question. The two studies above looked at different indices. Different sectors and national economies will display different patterns of seasonality regardless, so if your portfolio is weighted in any particular direction then this will also have an impact on summer returns.
Global market shifts can, as Beauchamp points out, happen at any time. While 2022-2024 were relatively good years for the “sell in May” strategy, anyone taking that approach in 2021 would have lost out, as markets rebounded with the post-Covid reopening that lifted markets.
There is some evidence that average returns are higher during the winter than they are in the summer. However, if your strategy involves selling in May then buying your shares back in September or October, the market has to have fallen – rather than just generate smaller returns than you got in the winter – in order for you to profit.
There’s far less evidence for that happening. A study from Manulife Investment Management in 2023 found that a buy-and-hold strategy beat selling in May over the preceding 10-, 20- and 50-year periods.
Should you sell your stocks in May 2025?
Perhaps the “sell in May” strategy is overblown. How might the summer months play out this year in particular, though?
2025 has been a rollercoaster year for the stock market so far, and many of the more traditional rules of thumb have been thrown out of the window.
However, Beauchamp points out that the biggest source of market volatility of 2025 so far could well rear its head during the summer.
“The view at the moment is very strongly that the bad news hasn’t arrived from tariffs,” he says. “We’re still getting the data from the first few months before the tariffs took effect.”
In the last month, markets have gone from “pricing in complete Armageddon” back to above where they were before the tariff announcements.
“Once we start getting into June and July, and the May and June data starts to come through… then that might start to look worse. Markets might then react more negatively.”
The 90-day pause on reciprocal tariffs, which injected the first semblance of calm after the tariff turmoil, expires in July. That could well inject further volatility into the stock market.
Does that mean it’s a good year to sell your shares in May? It would be ironic, if so – given that the lack of summer volatility was precisely why the traders of old sold in May to begin with.
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