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 2009 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 only $1,021 for the 5/1-10/31 time period, an average gain of 0.6% [35 up / 23 down].
Investing $10,000 for the 11/1-4/30 time period, each year since 1950, has netted an amazing $531,444, or an average gain of 7.6% [45 up / 13 down].
But I thought we’d look at the current volatile decade, 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, but then again, look at the performance in the big down years.
[S&P -10.1% for 2000]
[S&P -13.0% for 2001]
[S&P -23.4% for 2002]
[S&P +26.4% for 2003]
[S&P +9.0% for 2004]
[S&P +3.0% for 2005]
[S&P +13.6% for 2006]
[S&P +3.5% for 2007]
[S&P -38.5% for 2008]
Conclusion? Ignore the theory…and this is the last time I’m bringing it up on this site. Now the issue of a “summer rally” is a little different and I’ll explore that in another few weeks.
Source: StocksandNews.com database; “2009 Stock Trader’s Almanac” edited by Jeffrey A. Hirsch & Yale Hirsch [a must have for any stock junkie]
