You’ve probably heard the expression “Sell in May and Go Away”.  It’s a well worn financial adage describing the malaise in the equity markets that can occur from May until the end of September.  It’s often attributed to the belief that as warmer weather appears, the volume of market participants reduces (due to vacations) thus trading volumes drop meaning that the market can be somewhat riskier and lackluster. 

This can result in stocks underperforming over the summer period.  The theory therefore goes that if you sold your stocks in May and came back at the start of October you may be better off, and probably no worse off, than if you’d held onto them.

But does this theory still hold water in this world where significant volumes of trades are being done by systems?  It certainly doesn't feel as true given the past few years of ever upward price increases.

If you look at the data since 1950 (in the diagram below from LPL Research) you can see that the theory looks like it holds.  But that's cumulative data so it's only part of the story. 

The actual performance from May to October since 2011 shows a different picture, see below.  The last 10 year bull market has certainly had an impact.  In fact stocks gained in 8 out of the past 10 years and in some years there was double digit growth!

So what does that mean for this year?

Well as we all know, past performance is not necessarily a guide to the future!  However, Team Inteligex feel that the current bullish market momentum is unlikely to halt any time soon.  Albeit jobs data was poor last week, the re-opening of the economy combined with pent-up consumer demand and seemingly unending money stimulus are very strong drivers.   There may be some pullback over the summer period, which could bring further buying opportunities, but overall we believe the market will continue to rise. 

So how to play it?  Well as always take when you trade.  Use the Inteligex Pro Market Predictor to time your entry and exits and maximize your profits.   Inteligex is perfect for trading Commodities, Cryptocurrencies, forex, Futures and Stocks.  In fact, any liquid market, over any timeframe.