“The sun was warm but the wind was chill. You know how it is with an April day. When the sun is out and the wind is still, you’re one month on in the middle of May.” American Poet Robert Frost
One of the best known investment axioms is to “sell in May and go away.” This is largely because the six months from May through October have historically been some of the weakest months of the year for stocks. As you can see below, the next six months have tended to be on the weak side.
As shown in the LPL Chart of the Day, the next six months have indeed been the worst six months of the year, up only 1.7% on average. To add insult to injury, we are leaving the six most bullish months of the year. In fact, the S&P 500 Index is set to gain close to 30% during these most bullish six months, one of the best six-month gains ever.
“Stocks are up more than 87% from the March lows, suggesting a well-deserved pullback during these troublesome months is quite possible,” explained LPL Financial Chief Market Strategist Ryan Detrick. “But with an accommodative Fed, fiscal and monetary policy, along with an economy that is opening faster than nearly anyone expected, we’d use any weakness as an opportunity to add to positions.”
Here’s the catch, isn’t there always a catch? Stocks have actually been higher during these worst months of the year eight of the past ten years.
We will take a closer look at this important concept on Monday in our latest Weekly Market Commentary, so be on the lookout for it!
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All index and market data from FactSet and MarketWatch.
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