Our new interactive Stock Seasonality Tool (available to Bespoke Premium and Bespoke Institutional members) allows investors to test seasonal tendencies for any asset class with a couple clicks of the mouse. It’s truly an amazing new feature that we’ve added for members.
In a recent Chart of the Day, we wanted to highlight the power of the Stock Seasonality Tool by testing out the popular “Sell in May, and Go Away” hypothesis for the stock market. With our Stock Seasonality Tool, you can not only easily pull up this analysis for the S&P 500 in a couple of seconds, but you can also pull it up for every major country stock market around the world to see if it holds true outside of the US as well.
The old “Sell in May, and Go Away” adage suggests that stock market returns are typically poor during the summer months, so it’s best to just forget about stocks and set sail during this period. Let’s see how true the adage really is.
Once you’re at the Stock Seasonality page, click the button at the top of the page that says “Custom Seasonality Analysis.” The box below will show up on your screen. Click the “Analyze” drop-down menu and select “Global Equity Indices.” Leave the “Refine” drop-down menu the same, and for the “Select Date Range” option, select April 30th as the Start date and September 30th as the End date. Our database uses closing prices for the dates shown, so using April 30th as the start date and September 30th as the end date will show you historical performance for all global equity indices from May 1st through September 30th of every year.
The “Years to Look Back” option tells the database how many years you want to go back when running the analysis. For global equity indices, the database can look back 28 years starting in 1990. (While the S&P 500 goes back to 1928, most price data for other country indices only goes back to the 1980s or 1990s.) For this analysis, we’ll go back as far as possible to 1990, so increase the “Number of Years” option to “28.”
Click the “Submit” button when you’re done.
Along with a chart highlighting the 5 best and 5 worst performing country stock markets from the May to September period, clicking the “Submit” button will also return the table below. To be included in the table, the index or country has to have data going back at least 19 years (2/3 of the 28 year total). (Note that all performance numbers are in local currencies as well.)
So what do the results show? At the top of the table, you can see that over the last 28 years, the S&P 500 has experienced a median change of +2.80% from May through September with positive returns 64.29% of the time. You can also see results for a number of other countries, but we’ll get to that later.
Now that we’ve shown that the S&P 500 has historically posted a median gain of 2.80% during the May through September period (the “Sell in May, and Go Away” period), let’s run a screen that shows the S&P’s performance during the remaining months of the year to see how the two compare. All you have to do to run this screen is reverse the Start and End dates. At the Stock Seasonality page, change the Start date to September 30th and the End date to April 30th. Keep the number of years to look back at 28 so we get a true comparison.
Click the Submit button once you’ve changed the dates.
Below is a snapshot of the table that appears when running the screen above. Here you can see that over the last 28 years, the S&P 500 has posted a median gain of 10.97% during the October through April period with positive returns 85.19% of the time.
Remember, the ‘Sell in May, and Go Away” strategy showed a median change of just 2.8% from May through September with positive returns 64.29% of the time. That’s very weak compared to the 10.97% median change from October through April, suggesting that the “Sell in May, and Go Away” adage is somewhat true. While “Sell in May” performance is not outright negative, it has clearly been a much weaker period of the year.
So how does the “Sell in May, and Go Away” strategy look for other country stock markets? The results from our screens above provide some very insightful information. For some countries, the differences in performance are extremely one-sided, while for a few other countries, the May through September period is actually stronger than the October through April period.
Below is a table showing the countries that have the biggest spread in performance between the October through April and May through September periods. The countries where “Sell in May, and Go Away” works best include Russia, Germany, Italy, and Turkey. As shown, the median change for Russia’s stock market from October through April has historically been +19.65%, while its median change during the May through September period has actually been negative at -1.51%. For Germany, the DAX has historically seen a median gain of 17.02% from October through April, while May through September has been totally flat.
For the MSCI World index, October through April has historically gained 9.33%, while May through September has gained just 1.21%. The October through April period has seen positive returns 85.2% of the time, while the May through September period has been positive just 60.7% of the time.
The table below is another version of the one above, with this one sorted by the spread between the “% of Time Positive” numbers. Here we see that Australia’s stock market is on top, with positive returns 92% of the time from October through April, and positive returns only 44% of the time from May through September. Ironically, Australia’s summer comes during our winter (and vice versa), so you might have expected the opposite of the “Sell in May” strategy to work best. Clearly that’s not the case, though!
In the UK, the median numbers for the “Sell in May” strategy aren’t that extreme, but the theory still holds true. Since 1990, the October through April period has seen the FTSE 100 post a median change of +6.29%, while the May through September period has seen a median change of 0%. The October through April period has been positive 88.9% of the time, while the May through September period has only been positive 50% of the time. That’s a significant difference.
There are only five countries that typically experience better performance during the May through September period, and they’re shown below. India is the most notable country on the list. The SENSEX has historically seen a median gain of just 3.95% from October through April, while May through September has seen a median gain of +6.45%.
In terms of “% of time positive,” Botswana’s stock market is on top, with positive returns from May through September 78.6% of the time, and positive returns from October through April 66.7% of the time.
All of the tables above were either direct screenshots from our Stock Seasonality Tool in action, or they were built in Excel after copying and pasting the data. Hopefully this analysis has given you a good example of what our Stock Seasonality Tool can do. Along with the ability to track seasonality for any country stock market, remember that you can also run screens on all US stocks and ETFs, and you can even run it specifically on the stocks in your Custom Portfolios that you’ve built in our Trend Analyzer tool. To pull up your Custom Portfolio stocks, simply select “Custom Portfolios” using the “Analyze” drop-down menu.
If you have any questions about how to use our new Stock Seasonality Tool, feel free to email or call us at 914-315-1248.