Sell in May, Just Not in the U.S. of A., Stock Performance Shows

(Bloomberg) -- With the end of April looming, investors are bound to hear -- and disregard -- the old stock market adage “sell in May and go away, don’t come back ’till St. Leger’s Day.” But there may be some truth in the saying, outside the U.S. at least.

A look at 30 years of data across a variety of assets and geographies shows that while American stocks tend to show positive returns over the May-to-mid-September period, those in Asia and Europe don’t.

The 30-year average return of the MSCI Asia Pacific Index from May 1 to Sept. 15 -- this year’s date for Britain’s St. Leger Day horse race, which traditionally signaled the end of summer -- was negative 1.2 percent, according to Bloomberg calculations. The same for Europe’s Stoxx 600 was a negative 1 percent and that for the FTSE 100 was minus 0.4 percent.

Conversely, the S&P 500 returned 1.2 percent over the same period, not stellar but not necessarily a reason to sell at the start of the summer either.

For investors in other asset classes, the data show there’s some evidence of risk aversion in the summer months. The average gain for U.S. Treasuries was 2.8 percent over the five-and-a-half month period, beating that of stocks as well as the 2 percent rise in U.S. high-yield bonds. Gold also showed a positive return, up 0.6 percent on average.

Of course the study only measures average returns. An Asian investor who sold in May 2003 would have missed out on a whopping 30 percent gain, and a European fund manager “going away” in 2009 didn’t participate in a 20 percent rally.

However, they would have avoided a lot of red, too. While just 10 of the last 30 years showed negative returns for American investors, selling in May would have saved Asian investors from losses 19 times and European traders 16 times.

©2018 Bloomberg L.P.

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