It’s hard to believe that tomorrow is the first day of May for us Chicagoans, as we’ve only experienced a glimpse of spring after a brutal, brutal winter. But the stock market doesn’t particularly care whether you’re already enjoying Spring temperatures or not – it’s May 1 for the stock market today whether you’re ready for it or not. Which means it’s high time for one of the catchiest stock market sayings out there:
“Sell in May and go away.”
Financial Blogger Zerohedge dug into this theme a little more with a recent post, highlighting the S&P 500’s average returns by month since 1950, and the data definitely supports the theme, with the May through October returns visibly less than Nov. through April.
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: ZeroHedge
But is it really that easy? Just sell in May? Does it matter if stocks have been going up leading into May, what about if they’re down? What if we’re in the 2nd year of a presidential cycle? Luckily, there’s firms like J. Lyons Fund Mgmt. working through just these sorts of thought experiments. Their most recent post shows that this type of environment (moderate gains leading up to May) as resulted in somewhat moderate May-Oct returns, not losses – while the 2nd year of the presidential cycle shows and average May-Oct gain of 0.00%.
(Disclaimer: Past performance is not necessarily indicative of future results)
(Disclaimer: Past performance is not necessarily indicative of future results)
Which leads us to our little patch of turf, managed futures. How have managed futures performed in the May-Oct period as compared to stocks, and in May-Oct periods preceded by moderate growth like this? Glad you asked:
(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy: Barclayhedge CTA Index
Looks like there is no such phenomenon as ‘Sell in May’ in Managed Futures, with the May through October period in Managed Futures actually outperforming the rest of the year (except when stocks have seen a big 20% or more rally through the preceding April). It’s good to see the average managed futures performance following a Nov. through April period seeing stock market gains of between 0% and 19% (that’s what we just came through) at +5%. We sure could use it, and this mirrors past data we’ve run showing managed futures tend to be a 2nd half performer.
And what about Presidential Cycles? Does being in the 2nd year of a cycle make any difference for managed futures performance? A fun exercise, but there’s not much correlation between managed futures returns and the Presidential Cycle from what we see, although we’re glad to see that +5% number again for the May to October performance in Yr. 2 of the presidential cycle (this year).
(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy: Barclayhedge CTA Index