'Sell in May and go away'? Wealth advisors say, maybe not

The old Wall Street adage, "Sell in May and go away" may sound trite, but the numbers say it’s also, to some extent, true.

If that’s the case, why don’t more financial advisors use it as an investment strategy?

For those unaware, the Wall Street maxim "sell in May and go away" refers to the generally weaker performance of stocks from May to October, as compared with the November to April period, which the Stock Trader's Almanac refers to as the "best 6 months of the year." Since 1990, the S&P 500 has averaged a return of approximately 3 percent annually from May to October versus about 6.3 percent from November to April, according to Investopedia.  

A Fidelity study also shows this outperformance is seen not just in large-caps, but also small-cap and global stocks.

As tempting and simple as this seasonal strategy sounds, Stuart Katz, chief investment officer at Robertson Stephens Wealth Management, advises against it.

“Periods of heightened tariff tensions or cute rules of thumb like ‘sell in May’ can tempt even seasoned investors, but history shows that staying invested is usually the wiser path.  Staying invested is especially prudent for taxable accounts where there is a tangible cost to buy and sell. Markets are inherently volatile, and this potentially creates tax-loss harvesting opportunities throughout the year – not necessarily specific months or seasons,” Katz said. 

Katz also highlights recent periods where the strategy failed and would have cost investors dearly had they employed it. For example, 2018 was one of the worst years for the strategy, as investors would have suffered a 10.8 percent loss by selling in May, missing strong summer gains. The strategy also failed in 2009, with a 14.7 percent underperformance compared to staying invested, according to Katz.

Along similar lines, Tracy Byrnes, vice president of women and investments at Lebenthal Global Advisors, said Wall Street loves its catch phrases, but it’s usually best “not follow advice simply because it rhymes.”

“There certainly may some reasons to sell in May, however, but that has less to do with any cliché or seasonal behavior. Some clients will want to give themselves more cash over the summer months to pay for vacations, or summer rentals, or camp for the kids. The same is true before holidays like Christmas. But that’s more selling as part of an overall financial plan than any kind of market-timing strategy,” Byrnes said. She added that for the most part, market timing is a “sucker’s game,” and only exacerbated when based on days of the week or months of the year.

And don’t expect to see Nathan Hoyt, chief investment officer at Regent Peak Wealth Advisors, selling his equity holdings tomorrow and heading to the Hamptons, either. Hoyt fundamentally rejects any perceived seasonality or calendar-driven investment thesis.

“If you sell in May, what do you buy that outpaces the historical 3 percent annualized returns until October? When October arrives, risk doesn’t magically disappear, even if you are disciplined enough to re-invest,” Hoyt said. 

Added Hoyt: “Seasonality trends are easy to spot and thus a tempting trap that investors fall into thinking they can time the market, unlike the rest of us. I wouldn’t ask my clock or my calendar to predict the future.”

Finally, Marcus Maloney, strategic solutions consultant at CapIntel, believes there is indeed value in helping clients understand historical market patterns like this one, especially if it supports their broader financial literacy. However, he views "sell in May and go away" ultimately as a speculative strategy.

“It conflicts with long-term investment approaches that focus on consistency, alignment to goals, and trust, which are core principles that advisors rely on to guide clients through all market cycles,” Maloney said.

When clients start suggesting tactical shifts, Maloney feels it is most often a sign that there may be a disconnect in their understanding of their current plan, or that something in their risk tolerance or objectives has changed.

“These conversations can be a great opportunity for advisors to pause, revisit the strategy, and ensure it still fits,” Maloney said.