The weather has finally started to heat up here in Chicago, and with the stock market having tanked thus far in June, many investors we talk to are repeating the old investing maxim:
Sell in May, then go away…
The logic is that the gains for the year have already been made, and keeping money in the market through the 2nd half of the year will only result in giving back some of those gains. While that appears it may (no pun intended) be working in the stock market so far (although there is a long way to go til the end of the year) – we have found the exact opposite to be true in managed futures over the years. Managed futures tend to have better performance in the second half of the year usually. [past performance is not necessarily indicative of future results]
The table below shows graphically an interesting statistic which gives us a lot of confidence in managed futures heading into the second half of the year. Looking back over the past ten years, the Down Jones Credit Suisse CTA Index has performed much better in the second half of the year in comparison to its first half performance. On average, over the past ten years, managed futures has delivered returns of 2.80% in the first half of the year, and returns of 4.95% in the second half of the year.
[Past performance is not necessarily indicative of future results. Managed futures = DJCS CTA Index. Data from 2001-2010]
Whether this second half outperformance is due to trends tending to emerge more in the latter part of the year, as investors flock to what’s working and dump what’s not (causing trends to extend), or due to volatility tending to pick up in the Sep-Nov period each year in anticipation of an October crash, or less competition for quick day trading profits due to lower volume in the summer months, or due to money coming out of the stock market via the sell in May and go away myth – we can’t say. But it makes you think…