Sell in May and Go Away? Maybe Not

Why It Matters

The piece highlights that relying solely on historical seasonality could misguide investors amid shifting geopolitical dynamics and supply‑chain normalization, underscoring the need for a nuanced, data‑driven approach to portfolio risk management.

Key Takeaways

• S&P 500 up 9.2% YTD, strongest April since 2020.
• May returns improved to 1.5% average since 2013.
• Historical May‑Oct period yields 2.1% average, 82% positive last 12 years.
• Oil market signals tighter supply, keeping inflation risk alive.
• VIX typically spikes July‑Oct, indicating higher fall volatility.

Pulse Analysis

The equity rally that has propelled the S&P 500 to a 9.2% gain this year reflects a confluence of macro factors. Diminishing tensions with Iran and the prospect of the Strait of Hormuz reopening have eased oil‑price anxieties, while a gradual normalization of global supply chains supports corporate earnings. At the same time, solid first‑quarter results and resilient consumer spending have reinforced confidence in the market’s upside, even as Treasury yields stay elevated, suggesting that the equity market is pricing in a more optimistic growth outlook.

Seasonality traditionally warns investors to “Sell in May and go away,” a rule born from the historically weak performance of the S&P 500 in the May‑October window. However, the data since 2013 tells a different story: May has averaged a 1.5% gain, and the six‑month period from May to October has posted positive returns in 82% of the last 12 years, with median gains above 5%. These recent trends indicate that the old adage may be losing relevance, especially when earnings momentum and a softer inflation backdrop outweigh historical patterns. Investors should therefore weigh current fundamentals alongside seasonal tendencies rather than relying on a blanket exit strategy.

Looking ahead, volatility is likely to climb as the market enters the historically turbulent summer months. The VIX historically peaks between July and October, reflecting heightened uncertainty, while the oil market continues to signal a “higher‑for‑longer” supply regime that could reignite inflation pressures. Should Middle‑East tensions ease and oil prices retreat, equities could benefit, but any reversal could quickly revive risk aversion. Portfolio managers are advised to maintain diversified exposure, monitor geopolitical developments closely, and consider tactical hedges to navigate the expected rise in market volatility through the fall.