In a remarkable turn of events, both the S&P 500 and Nasdaq wrapped up April with their most robust monthly performances since 2020. The crucial question now is whether this momentum will sustain as we move into May.
Traditionally, May has ushered in a six-month period characterized by lackluster returns in the U.S. stock market, reinforcing a time-honored investing adage: “Sell in May and go away.” This phrase encapsulates a strategy that suggests investors should pull back from equities during the summer months and re-enter the market in November, a time when conditions tend to be more favorable for investment.
“This concept implies that investors are better off stepping aside from the stock market during the warmer months,” stated Adam Turnquist, chief technical strategist at LPL Financial, in a recent research note. He elaborated on this strategy, highlighting its historical significance in guiding investor behavior.
However, in today’s investing landscape, this traditional strategy may lack relevance. Even if market conditions tend to mellow over the summer, Turnquist analyzed trends in market performance from May to October dating back to 1950. His analysis revealed that during this six-month span, the S&P 500 historically yielded the weakest returns, averaging a modest gain of just 2.1%. This sobering statistic raises concerns about adhering to age-old advice.
In more recent years, however, the performance between May and October has shown a notable uptick. Over the past twelve years, Turnquist pointed out, the average return during this period has increased to 5.1%. This shift suggests that while seasonal patterns provide valuable historical insights, they may not always serve as reliable predictors of future market behavior.
Given the current market volatility, particularly due to the ongoing conflict in Iran, the advice to “sell in May” may be particularly misguided this year. The unpredictable nature of the markets makes historical returns less applicable as a guiding principle for investors.
Recently, fluctuations in oil supply through the Iranian-controlled Strait of Hormuz have become a significant driving force behind market movements, overshadowing seasonal trends. The rising stock prices indicate that investors are optimistic about a potential peace deal between the U.S. and Iran, which could stabilize the market.
On the home front, major corporations such as Apple, Roku, and Moderna are reporting first-quarter performances that exceed expectations, creating a buzz in the market partly due to anticipated tariff refunds from the Trump administration. These developments contribute to a more complex investment landscape that cannot be easily navigated by simply adhering to outdated strategies.
These unfolding events alone call into question the wisdom of selling this May. Additionally, the practical tax implications of selling stocks while the market is at or near an all-time high should not be overlooked. Selling in a taxable account may result in capital gains taxes, which could significantly reduce your returns, even if you re-enter the market later this year at a similar price point, as noted by Hook Wealth Management.
A separate analysis conducted last month by Eric Wenz, an associate portfolio manager at American Century Investments, emphasized the importance of holding investments rather than selling during periods of market dips. Wenz illustrated the growth trajectory of a $1,000 investment in the S&P from 1976 to 2025, contrasting the “sell in May” approach with a simple buy-and-hold strategy. After nearly five decades of market growth, the “sell in May” investment yielded just over $46,000, reflecting an increase of 4,535%.
In contrast, the buy-and-hold strategy saw the investment value soar to nearly $295,000, resulting in an impressive increase of 29,179%. This stark difference highlights the potency of long-term investment strategies. “Long-term portfolios that adhered to a buy-and-hold strategy consistently outperformed those that exited in May,” Wenz noted, reinforcing the idea that maintaining investments through various market conditions yields superior results over time.
Madeline Everett is a passionate writer and contributor to Oxford Wise Finance, where she explores a wide range of general topics related to personal finance and financial literacy. With a keen eye for detail and a deep understanding of economic principles, she aims to empower her readers with practical advice and insights. Madeline’s engaging writing style makes complex financial concepts accessible, helping her audience navigate the often daunting world of finance. When she’s not writing, she enjoys exploring the latest trends in the financial sector and sharing her knowledge with others.
