"Sell in May and Go Away": Definition, Statistics, and Analysis

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“Sell in May and go away” is a market adage that advises selling stocks at the start of May and staying out of the equity market until November. It rests on a historical observation: in many decades of U.S. data, stocks have earned lower average returns from May 1 to October 31 than from November 1 to April 30. An older and shorter version, “go away in May, come back in September,” shortens the time out of the market and points the investor back in before autumn rather than at Halloween. Neither version is a rule about what stocks will do in a given year. Both describe an average that has held over some long periods, failed in others, and swung widely from year to year.

What Is “Sell in May and Go Away”?

The saying is usually traced to the London financial community, where the fuller rhyme ran “Sell in May and go away, and come on back on St. Leger’s Day.” The St. Leger Stakes is a horse race held at Doncaster in September, and the line reflected an era when wealthy investors and brokers left the city for the summer social season. That origin explains the “come back in September” variant: the original advice was to step away for the summer months, not for half the year.

The modern six-month version comes largely from the Stock Trader’s Almanac, which popularized what it calls a “best six months” approach. Its research found that holding the Dow Jones Industrial Average from November through April and switching to fixed-income investments for May through October would have produced reliable returns with reduced risk since 1950. The same idea is sometimes called the Halloween indicator or Halloween effect, because October 31 marks the point to buy back in.

The two versions lead to different trades. Under the six-month rule, the investor is out of stocks for all of September and October. Under the St. Leger version, the investor returns in September, which in many historical tallies has been the weakest month of the year on average. The older saying came from social habits, not from statistics, which is one reason the two versions do not agree on timing.

How “Sell in May and Go Away” Works

Followed literally, the strategy has two moves a year:

1. On or around May 1, sell the stock holdings (or a stock index fund) and move the proceeds into bonds, Treasury bills or cash.
2. On or around November 1, sell the fixed-income holdings and buy stocks again.

Whether the switch adds value depends on one comparison for each summer: did the fixed-income alternative return more than stocks would have, after trading costs and taxes? The winter half is held in stocks either way, so it does not affect the comparison.

Over a full year, returns from the two halves compound rather than add:

Annual return = (1 + winter return) × (1 + summer return) − 1

A buy-and-hold investor earns the stock return in both halves. A sell-in-May investor earns the stock return in winter and the fixed-income return in summer. The strategy wins in a given year only when:

Summer fixed-income return − switching costs − tax drag > summer stock return

Interpreting “Sell in May and Go Away”

A lower average is not the same as a loss. Using the figures above, an average six-month gain of about 3% for May to October is roughly 6.1% on an annualized basis ((1.03)² − 1). That is weaker than the winter half but still a return the investor gives up by leaving.

The averages also depend on the index and the period chosen. The Almanac’s research used the Dow from 1950. One analysis of the S&P 500, which has data going back to 1927, found the reverse in earlier decades: summer returns beat winter returns by 11.23 percentage points in the 1930s and 4.51 points in the 1940s. An adage that holds from 1950 but fails in the two decades before it reflects the sample period as much as any lasting feature of markets.

Monthly figures complicate the picture further. In recent S&P 500 monthly returns, the gap looks less like a weak “summer” and more like weakness concentrated in particular months, especially September. If one or two months drive the gap, a six-month exit is a blunt response to a narrower effect.

Why Is There Seasonality to Stock Prices?

No single cause explains seasonal differences in stock returns, and the subject is still debated. The main explanations fall into three groups.

Lower summer activity. Summer vacations reduce trading volume, and some argue that thinner participation means weaker demand for stocks. The explanation is intuitive, but the size of seasonal price changes does not track the drop in volume closely, so lighter trading alone does not account for the gap. This is also where the idea of Wall Street “coming back” after Labor Day comes from: volume tends to pick up as traders and portfolio managers return in September.

Institutional calendars. Many mutual funds end their fiscal year in October. Around that date, managers may rebalance portfolios and engage in window dressing, selling losing positions and buying recent winners so reports look better. That activity can put pressure on certain sectors at predictable times and feed into seasonal patterns.

Psychology and macroeconomics. Investor mood, year-end tax decisions, holiday spending and the timing of economic releases and earnings seasons all fall on a calendar. Some of these forces may push returns around in a seasonal way, though separating them from ordinary market noise is difficult.

The deeper problem is that a well-known pattern tends to weaken. If enough investors expected others to sell in May and buy in November, early sellers would move in April and buyers would compete to get back in during October. The effect would shift earlier or disappear as traders tried to exploit it.

Example of “Sell in May and Go Away”

Hypothetical example (illustrative numbers, not a forecast or a historical year). An investor starts with $10,000. Assume stocks return 6% from November to April and 3% from May to October, and that a Treasury bill alternative returns 2% over the summer six months. Ignore dividends and trading costs for now.

• Buy and hold: $10,000 × 1.06 × 1.03 = $10,918
• Sell in May: $10,000 × 1.06 = $10,600 in stocks through April, then $10,600 × 1.02 = $10,812

Even though the summer half is weaker, the switch costs $106 in this example because bills earn less than the summer stock return.

Now add taxes. In a U.S. taxable account, shares bought in November and sold the following May have been held for about six months, so any gain is a short-term capital gain taxed at ordinary income rates rather than at the lower long-term rates that apply after more than a year. A buy-and-hold investor defers tax entirely until selling. In a tax-advantaged retirement account this drag disappears, but transaction costs and bid-ask spreads remain.

Historical figures show the same tension at larger scale. In one illustration, $100 invested only during the summer halves starting in 1990 (gains withdrawn each October 31, dividends included, costs excluded) grew to $249.33. A winter-only version grew more. But the summer-only result is not a loss. It is the growth a sell-in-May investor gives up, and in a buy-and-hold portfolio those summer gains compound together with the winter gains.

Individual years can swamp the average. In 2020 the summer half returned about 24% while the following winter returned −7.7%. In 2009 the summer half returned 21.9% against −9.4% for winter. An investor following the rule in either year would have sat out the strongest stretch.

Limitations of “Sell in May and Go Away”

The average hides large swings. In any given year, earnings, interest rates, recessions, policy changes and shocks matter far more than the calendar. A six-month average difference of a few percentage points is small relative to the range of outcomes in individual years.

Results depend on the sample. The pattern looks strong from 1950 in the Dow and reverses in the S&P 500 during the 1930s and 1940s. A strategy whose value depends on where the backtest starts gives little assurance about the next decade.

Election years disrupt the pattern. Ed Clissold of Ned Davis Research has noted that since 1950 the S&P 500 rose from April 30 to October 31 in 78% of presidential election years, against about 64% in other years. The summer half has more often been positive than negative in both groups.

Costs, taxes and lost compounding. Two round trips of trading per year (out and back in each time) add commissions, spreads and, in taxable accounts, short-term gains. Leaving the market also interrupts dividend reinvestment and regular dollar-cost averaging, both of which contribute to long-term growth.

Market timing is hard to beat. A Charles Schwab study modeled investors who each received $2,000 a year for 20 years, from 2003 through 2022, and invested in the S&P 500 in different ways:

• Perfect timing (buying at each year’s low): $138,044
• Investing immediately at the start of each year: $127,506
• Dollar-cost averaging through the year: $124,248
• Worst timing (buying at each year’s high): $112,292
• Staying in cash: $43,948

Perfect timing beat immediate investing by about $10,500 over 20 years. Even the worst-timed investor ended with more than two and a half times the amount held in cash. The cost of being out of the market dwarfed the cost of bad timing within it.

Alternatives to “Sell in May and Go Away”

Investors who believe in the seasonal pattern but do not want to leave stocks can rotate sectors instead. Research from CFRA (the Center for Financial Research and Analysis) argued that cyclical sectors, including consumer discretionary, industrials, materials and technology, have tended to do better from November through April, while defensive sectors such as consumer staples and healthcare have held up better from May to October. Since 1990, the S&P 500’s consumer staples and healthcare sectors gained 4.1% on average from May to October, more than the broad index.

That research underpins the Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF (SZNE), which rotates between defensive sectors in summer and cyclical sectors in winter. Its record shows how hard it is to turn a historical pattern into a product: the S&P 500 consistently outperformed the fund from 2022 onward. The fund’s expense ratio was cited at 0.60% a year, against about 0.05% for a typical passive S&P 500 index fund, so the strategy needed to outperform by more than half a percentage point each year just to match the index.

Other ways to act on seasonal views without a full exit include trimming rather than selling, timing scheduled rebalancing for the spring, or directing new contributions toward defensive holdings during the summer. Each keeps most of the portfolio invested.

Calendar Effects Often Confused With “Sell in May”

January effect

The January effect holds that stocks, especially small caps, tend to rise at the start of the year, possibly because investors sell losers for tax purposes in December and reinvest in January. As the pattern became widely known, its size and predictability shrank. For the SPDR S&P 500 ETF (SPY) from 1993 to 2023, there were 17 positive Januarys (57%) and 13 negative ones (43%), only modestly better than a coin flip. The January effect is about a single month and mainly small companies. “Sell in May” is about two six-month halves of the broad market.

Santa Claus rally

This term describes a tendency for stocks to rise in the last trading days of December and the first days of January. It covers a window of about a week, not a season, and it falls inside the favorable half of the “sell in May” calendar.

September weakness

September weakness is a single-month pattern, not a six-month one. Some of the summer underperformance may come from September alone rather than from the whole May to October period.

FAQs

What are the best and worst months for stocks?

Since 1950, April and November have been the strongest months on average, and September the weakest. Rankings change with the index and the period: since each index began, November has been the best month on average for the Nasdaq Composite and July for the S&P 500. Averages also do not hold every year. April 2024, for example, was a negative month for the S&P 500.

Is May the worst month for stocks?

No. In the historical rankings cited above, May places second worst, behind September. It has also had strong results in many years, including 2020 and 2024. Its reputation comes mostly from starting the weaker six-month window, not from being the single worst month.

Do stocks usually go down in the fall?

Not as a rule. September has the weakest average among the months, and October has a reputation tied to dramatic crashes in 1929 and 1987 (Black Monday, October 19). But October also marks the end of the weak half under the six-month rule, and November has been one of the strongest months on average. Many falls have been positive for stocks.

The Bottom Line

“Sell in May and go away” describes a real difference in average returns between the two halves of the year in some long U.S. data sets, not a reliable annual pattern. For most investors, staying invested year-round, or at most tilting toward defensive sectors in summer, has historically served better than leaving the market every May.