05/06/2011
Sell in May?
Note: The last few years I said I wouldn’t produce the following anymore because its validity was suspect, but I’m once again scrambling to catch up from my travels and updating the theory 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 2011 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 $474 for the 5/1-10/31 time period, just $9,526 remaining on your initial stake, with the Dow being up 36 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 $527,388, or an average gain of 7.4% [46 up / 14 down].
*These figures are thru 2009. The 2011 Stock Trader’s Almanac was published before 2010 returns had come in.
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]
4/30/10…1186
10/31/10…1183… -0.2%
[S&P 500 +12.8% for 2010]
Sources: StocksandNews.com database; “2011 Stock Trader’s Almanac” edited by Jeffrey A. Hirsch & Yale Hirsch
Wall Street History returns in two weeks.
Brian Trumbore
