Sell in May and Go Away? Not so Fast, as Earnings, Geopolitics May Offset Seasonal Concerns

Why It Matters

Ignoring seasonality this year could preserve gains, as market momentum and earnings strength may offset traditional summer weakness, impacting portfolio performance during a volatile election and policy environment.

Key Takeaways

• S&P 500 rebounded 10% in 11 sessions after oil shock
• May‑October returns averaged 2% historically, 7% in past decade
• Mid‑term election years have seen average 1.5% loss May‑Oct
• Strong earnings and easing Iran‑US tensions boost equity optimism

Pulse Analysis

The adage “sell in May and go away” has long guided seasonal trading, yet recent data suggests the rule may be losing relevance. The S&P 500 erased a near‑10 % decline in just eleven trading days after an oil‑supply shock, pushing the index back into bullish territory. Historical averages show a modest 2 % gain from May through October since 1945, but the last decade delivered a robust 7 % rise, highlighted by a 22.1 % jump last year. These numbers indicate that market momentum can outweigh calendar‑based expectations.

Two forces are underpinning the current optimism: corporate earnings and easing geopolitical tension. Strong quarterly results have reinforced confidence in earnings resilience, while the de‑escalation of the U.S.–Iran conflict removed a major headwind on energy markets. At the same time, the Federal Reserve faces a leadership transition, with Kevin Warsh poised to replace Jerome Powell, hinting at a potentially more volatile rate‑setting path. Adding to the mix, 2026 is a mid‑term election year, a factor that historically has produced a 1.5 % average loss for the May‑October window.

For investors, the takeaway is to treat seasonality as a guide, not a rule. The Reuters analysis shows a $10,000 investment held continuously since May 2016 would have grown to roughly $34,000, nearly double the outcome of a cash‑only summer strategy. While the election cycle and lingering geopolitical risks warrant caution, the market’s historical tendency to rally after a 5.5‑9.9 % pullback—averaging over 8 % gains in the subsequent three months—suggests that disciplined exposure may capture upside. Portfolio managers might therefore blend defensive positioning with selective growth bets rather than exiting equities entirely.