This week’s ATW looks at the “sell in May and go away” colloquialism that is often repeated at this time of year. Indeed the middle months of the year are often flat to slightly negative, as per the article attached. What is important to remember however, is that history is a guide, not a blue-print. Further, that sideways markets offer portfolio managers the opportunity to acquire companies whose stocks are drifting, where other investors have taken their eye off the ball.
An updated study by EquityClock on the S&P 500 Index applying Oct. 27 as the buy date and May 5 as the sell date recorded a nice profit as expected. The S&P 500 gained an average of 8.42 per cent per period and was profitable 80.6 per cent of the time. However, the study also found that applying May 5 as the buy date and Oct. 27 as the sell date recorded a profit averaging 0.20 per cent per period (thus not a loss) and was profitable 62.7 per cent of the time. So the numbers suggest the expression can be described as a danger and opportunity all at once, but only modestly so.
As has so often been said, we are firmly of the view that our model portfolios are well positioned for solid, risk-adjusted returns over time. The portfolio changes made earlier in the year including increasing weighting in US equities and inflation-protected bonds have been good. So steady as she goes and here’s to the first long weekend of the summer! Happy Victoria Day!