'Sell in May and go away' – is it a myth or a smart move for today's investors?

'Sell in May and go away' worked spectacularly well prior to 2000. Yet the benefits have steadily declined year on year since then. What does that say about seasonal strategies, and what actually works for long-term investors?

Suppose you sell all your investments in the spring, enjoy a care-free summer, and reinvest as autumn is around the corner. At least, that's what the stock market adage 'Sell in May and go away, don't come back till St Leger Day' would have you do.

The expression was first recorded in the 1950s and originated in the United Kingdom. At that time, financial professionals and wealthy families swapped London for their second homes as soon as summer was on the horizon.

In the months when they lived life to the full, the markets continued to move calmly along. Trading remained subdued until St Leger Day, the last major event on the British horse racing calendar in September.

The slogan took on a new twist over the years, with the term 'Halloween Effect' (or 'Halloween Indicator') emerging. This theory aligns with the original slogan and suggests that shares perform better between November and April than between May and October (source).

What do the numbers say?

'Sell in May and go away' was initially popular among professional traders who relied on volatility to make profits, and not so much among average long-term investors. Over the years, however, it also turned out to be true for investors themselves to some extent.

Professor Derek Horstmeyer analysed all data on US large caps, small caps, growth and value stocks and international stocks from 1950 to 2023 and concluded that the effect is real. However, the story has become more nuanced today.

Before 2000, the difference was significant. Those who sold US large caps in April and returned in November, for example, achieved an annual average return of 19.62%. Those who only invested from May to October had to accept a return of 6.72% – a gap of almost 13 percentage points.

After 2000, the benefit declined sharply. Outside the summer period, US large caps achieved an average return of 13.29% per year, while from May to October the average return was 8.64%. That still represents a significant difference, albeit a smaller one (source).

The same pattern is also evident in growth stocks, value stocks, small caps and international stocks. Prior to 2000, you could achieve a much higher return by selling in May and reinvesting in November. Since 2000, there has still been a difference in returns, although it has been less pronounced.

Does it make sense to adjust your strategy?

Just because something worked on the stock market in the past doesn't necessarily mean it will work in the future. Those who took their chances last year, for example, would have been disappointed, as the S&P 500 rose by almost 23% between early May and late October 2025. Anyone who sold shares in May and reinvested in November saw an annual loss of -5% in 2025 (source).

In other words, Sell in May or the Halloween Effect aren't natural laws you can rely on time and time again. The summer months perform just as well in some years, with strong rallies after crises or unexpected interest rate cuts. Anyone getting out in May each year may miss recovery periods that determine a large part of the annual return.

What's more, today's markets are fundamentally different from those of the 1950s. Trading is almost continuous on a global scale, including before the stock markets open and after they close. Algorithms and ETF flows dominate the trading volume, and large institutional investors continue to be active in the summer. Markets are much faster and more efficient today. As soon as a pattern becomes widely known, algorithms and traders price it in, making the advantage disappear.

'Sell Rosh Hashanah, buy Yom Kippur'?

'Sell in May and go away' isn't the only stock market adage that revolves around timing. Investors may hope for a year-end rally in December each year, as shares often climb during the last trading days in December and the first few days in January. You should keep in mind the January Barometer, which states that the direction seen in January predicts the rest of the year, or the Decennial Cycle, the pattern in which stock market years ending in a certain digit tend to perform far better and more consistently.

There's even the stock market adage 'Sell Rosh Hashanah, buy Yom Kippur', which is based on the idea that the period between the Jewish New Year and Yom Kippur is historically turbulent for shares. The S&P 500 has lost an average of 0.68% between the two holidays over the past 25 years, only to gain 0.79% in the two weeks after (source).

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What does work then?

'Sell in May' and other stock market adages sound tempting due to their simplicity. Yet simplicity rarely solves complex problems. Investing is less about timing and making predictions and more about perseverance. Whether it's spring, summer, autumn or winter, there is always another crisis, another election, another unexpected shock in today's rapidly changing world.

One principle therefore remains true for long-term investors: time in the market generally outweighs trying to time the market. Time and time again, research shows that a limited number of trading days determines a large part of the total return. And it's precisely these strong days that often come around shortly after periods of uncertainty or downturns, when investors who leave the markets for a while remain on the sidelines. Anyone who tries to time the market on a regular basis runs the risk of missing out on the best days.

That doesn't mean that seasonal effects are completely worthless. They can, however, act as a sign to think about what to sell and what to reassess in your portfolio. Is your risk still in line with your objectives? Do you have enough diversification? Are you overexposed to one region, sector or theme? The list goes on.

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