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04/30/2010

Sell in May?

Note: Last year at this time I said I wouldn’t produce the following anymore because its validity was no longer applicable, but, I’m scrambling to catch up from a long trip and giving it one more shot fits my schedule.

Sell in May and go away. At least that’s the old saw on Wall Street.   Yale Hirsch first came up with it for his Stock Trader’s Almanac. Using the figures in the 2010 edition, if you sell May 1 and come back November 1, you have the following results since 1950, using the Dow Jones Industrial Average. 

Investing $10,000 in ’50 nets a loss of $1,988 for the 5/1-10/31 time period, just $8,012 remaining on your initial stake, with the Dow being up 35 times vs. 24 when it was down.* 

Investing $10,000 for the 11/1-4/30 time period, each year since 1950, has yielded an amazing $464,305, or an average gain of 7.3% [45 up / 14 down]. 

*These figures are thru 2008. The 2010 Stock Trader’s Almanac was published before 2009 returns had come in. [They brought it out way too early this time; it just needs to be noted. Do a better job, guys!]

But I thought we’d look at the volatile decade just completed, using the S&P 500. Can you divine anything regarding the ‘best six months’ strategy? You would have lost out on solid returns during the 2003-2007 bull run [10/9/02-10/9/07 to be exact…776 to 1565] by being out 5/1-10/31 (2009 as well), but then again, look at the performance in the big down years. 

4/28/00…1452 [S&P 500]
10/31/00…1429… -1.6%

[S&P -10.1% for 2000

4/30/01…1249
10.31.01…1059… -15.2%

[S&P -13.0% for 2001

4/30/02…1076
10/31/02…885… -17.8%

[S&P -23.4% for 2002]
 
4/30/03…916
10/31/03…1050… +14.6%

[S&P +26.4% for 2003

4/30/04…1107
10/29/04…1130… +2.1%

[S&P +9.0% for 2004]
 
4/29/05…1156
10/31/05…1207… +4.4%

[S&P +3.0% for 2005

4/28/06…1310
10/31/06…1377… +5.1%

[S&P +13.6% for 2006]
 
4/30/07…1482
10/31/07…1549… +4.5%

[S&P +3.5% for 2007

4/30/08…1385
10/31/08…968… -30.1%

[S&P -38.5% for 2008

4/30/09…872
10/31/09…1036… +18.8%

[S&P 500 +23.4% for 2009]

Conclusion? Ignore the theory. 

Source: StocksandNews.com database; “2010 Stock Trader’s Almanac” edited by Jeffrey A. Hirsch & Yale Hirsch [a must have for any stock junkie] 

Wall Street History returns next week….the Albanian Ponzi scheme.

 
Brian Trumbore
 



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-04/30/2010-      
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Wall Street History

04/30/2010

Sell in May?

Note: Last year at this time I said I wouldn’t produce the following anymore because its validity was no longer applicable, but, I’m scrambling to catch up from a long trip and giving it one more shot fits my schedule.

Sell in May and go away. At least that’s the old saw on Wall Street.   Yale Hirsch first came up with it for his Stock Trader’s Almanac. Using the figures in the 2010 edition, if you sell May 1 and come back November 1, you have the following results since 1950, using the Dow Jones Industrial Average. 

Investing $10,000 in ’50 nets a loss of $1,988 for the 5/1-10/31 time period, just $8,012 remaining on your initial stake, with the Dow being up 35 times vs. 24 when it was down.* 

Investing $10,000 for the 11/1-4/30 time period, each year since 1950, has yielded an amazing $464,305, or an average gain of 7.3% [45 up / 14 down]. 

*These figures are thru 2008. The 2010 Stock Trader’s Almanac was published before 2009 returns had come in. [They brought it out way too early this time; it just needs to be noted. Do a better job, guys!]

But I thought we’d look at the volatile decade just completed, using the S&P 500. Can you divine anything regarding the ‘best six months’ strategy? You would have lost out on solid returns during the 2003-2007 bull run [10/9/02-10/9/07 to be exact…776 to 1565] by being out 5/1-10/31 (2009 as well), but then again, look at the performance in the big down years. 

4/28/00…1452 [S&P 500]
10/31/00…1429… -1.6%

[S&P -10.1% for 2000

4/30/01…1249
10.31.01…1059… -15.2%

[S&P -13.0% for 2001

4/30/02…1076
10/31/02…885… -17.8%

[S&P -23.4% for 2002]
 
4/30/03…916
10/31/03…1050… +14.6%

[S&P +26.4% for 2003

4/30/04…1107
10/29/04…1130… +2.1%

[S&P +9.0% for 2004]
 
4/29/05…1156
10/31/05…1207… +4.4%

[S&P +3.0% for 2005

4/28/06…1310
10/31/06…1377… +5.1%

[S&P +13.6% for 2006]
 
4/30/07…1482
10/31/07…1549… +4.5%

[S&P +3.5% for 2007

4/30/08…1385
10/31/08…968… -30.1%

[S&P -38.5% for 2008

4/30/09…872
10/31/09…1036… +18.8%

[S&P 500 +23.4% for 2009]

Conclusion? Ignore the theory. 

Source: StocksandNews.com database; “2010 Stock Trader’s Almanac” edited by Jeffrey A. Hirsch & Yale Hirsch [a must have for any stock junkie] 

Wall Street History returns next week….the Albanian Ponzi scheme.

 
Brian Trumbore