Sell In May and Go Away? I Say "Nay"

Hey, GRIT sub!

When you watch financial news and scan through headlines enough, some catchy saying or phrase always emerges that investors attach to for some odd reason.

News headlines need to be attention-grabbing, just like the title of this newsletter. As you flip the calendar month, the popular jargon is “Sell in May and Go Away.”

This is based on the suggestion that traders should look to sell their stock positions in May, go to cash to protect capital, and then get back into the market around October. The theory is that the market will go sideways/down in the summer months, so try this market timing strategy to gain an edge.

If you’re a frequent reader of this newsletter, you know we don’t give in to silly calendar trend tactics.

Charlie Bilello (@charliebilello on x.com), the master of charts, has outlined this trend wonderfully.

He outlines that over the May - October timeframe, stocks are still positive on average, with an annualized return of +6.4%, in addition to stocks being up 72% of the time.

However, we also need to account for the shift to cash regarding this strategy. Leading money market funds currently have net yields of around 4.91% annually. To me, it’s as simple as 6.4% > 4.9%.

Additionally, a piece from BofA this week told investors not to “Sell in May and Go Away.”

Their analysis shows that June to August is the second strongest three-month period of the year for all years going back to 1928, with the S&P 500 up 65% of the time on an average return of 3.2%.

Want another piece of evidence that applies to recent history?

No problem

The average return in the May to October time period has been 4%. This is compared to the annual return rate of money market funds of 4.9%. Again - not listening to this idiom wins.

My suggestion here is to look at the data. The numbers tell us NOT to “Sell in May and Go Away.”

If you try to time the market, at least have a macroeconomic thesis surrounding real numbers like GDP growth, Inflation, interest rates, inverted yield curves…etc…

Or even better yet. Don’t time the market at all.

Do the work on fundamental compounders that you can hold over long periods and participate in the growth of solid businesses.

That’s what this newsletter is all about.

Picking secular winners and holding on, only selling these positions when the thesis changes, not marking a date in your calendar to dump stocks.

Cheers,

The GRIT Alpha Team

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