An Old Seasonal Truism

Most people are probably aware of the saying “sell in May and go away”. This popular seasonal Wall Street truism implies that the market’s performance is far worse in the six summer months than in the six winter months.

Numerous studies have been undertaken particularly with respect to US stock markets, which confirm the  relative weakness of the stock market in the summer months.

 

May has a bad reputation… rightly so, as it turns out.

 

What is the status of the “sell in May” rule in other countries though? I have examined the patterns in the eleven most important stock markets in the world.

 

The Eleven Largest Markets in the World Under the Seasonal Microscope

I have taken a look at the popular benchmark stock indexes of the eleven countries with the largest market capitalization from 1970 onward, or starting from the earliest year as of which continuous price data are available.

The comparison divides the calendar year into a summer half-year from May to October and a winter half-year from November to April. The position is assumed to be closed out on the first trading day of the following month. In the respective half-year in which no position in stocks is taken, a cash position that earns no interest is assumed to be held, so as to avoid any distortions in the depiction of the stock market’s seasonal returns by including interest income.

This much I will say in advance: The results are clear, in all eleven countries the winter half-year outperformed the summer half-year significantly. In the majority of these eleven countries one would actually have lost money during the summer half-year on average! These countries are:

 

  • Canada
  • France
  • Germany
  • Japan
  • Taiwan
  • United Kingdom

 

In other words, in these countries it would have been definitely better to go on vacation in the summer months – or to invest elsewhere.

 

The Half-Year Patterns of Nine Selected Countries

The charts below show the chained stock market performance in nine of the eleven countries during the summer months in red, during the winter months in green, as well as the full year returns in blue (=actual performance of the indexes).

Note: the scale of the charts is linear, as a result of which the performance patterns of the summer and winter half-year periods visually don’t appear to add up to the full year performance (but they do arithmetically).

 

Canada: Summer Half-Year vs. Winter Half-Year

 

The winter half-year even beats the full year! Source: Seasonax

 

China: Summer Half-Year vs. Winter Half-Year

 

Prices rise almost as strongly in the winter months as over the full year Source: Seasonax

 

France: Summer Half-Year vs. Winter Half-Year

 

The winter half-year beats the full year significantly! Source: Seasonax

 

Germany: Summer Half-Year vs. Winter Half-Year

 

Once again the winter half-year clearly beats even the year as a whole! Source: Seasonax

 

Japan: Summer Half-Year vs. Winter Half-Year

 

If one employs the “sell in May” strategy, even Japan is in a long term bull market. Source: Seasonax

 

Korea: Summer Half-Year vs. Winter Half-Year

 

During the winter prices rise almost as much as over the year as a whole. Source: Seasonax

 

Taiwan: Summer Half-Year vs. Winter Half-Year

 

In Taiwan the summer half-year is deeply in the red. Source: Seasonax

 

United Kingdom: Summer Half-Year vs. Winter Half-Year

 

It suffices to be invested during the winter months. Source: Seasonax

 

US: Summer Half-Year vs. Winter Half-Year

 

The winter half-year beats the summer half-year, but not the full year Source: Seasonax

 

In all of the markets shown here it was sensible to sell in early May – as the markets either posted losses or gains of less than one percent in the summer months in these countries. Investing in these markets during the summer was barely worth it:  After all, by employing the “sell in May” strategy, one is also exposed to less risk because one is only invested half of the time.

 

Detailed Results by Country

The following table shows the half-year results of the nine countries shown above in detail. Half-year periods in which it was profitable to be invested on a risk-adjusted basis are highlighted in green. Half-year periods that generated losses are highlighted in red.

 

Overview of Country Selection: Half-Year Results

 

Investing during the summer period was not profitable. Source: Seasonax

 

Conclusion – Sell In May Works

The table underscores that the summer weakness (a.k.a. the “Halloween Effect”) does indeed exist. Although it is a very simple and well-known rule, the pattern still works. Apparently a far too small number of investors is actually taking action based on their knowledge of the pattern and there is almost no arbitrage activity either.

The stability and persistence of the pattern suggests that “sell in May” will continue to work in the future.  Sometimes the simple rules are the best!

Note though: the table above is not complete – there are two countries in which investing in the summer months is actually profitable. If you want to learn which countries are defying the “Sell in May” rule and offer good prospects during the otherwise poor season, visit Seaonax News for a complete overview.

 

We couldn’t resist – Mark Twain chimes in with his two cents (of course, he didn’t have Seasonax).

Dimitri Speck specializes in pattern recognition and trading systems development. He founded Seasonax and publishes the website www.SeasonalCharts.com, which features free-of-charge seasonal charts for interested investors. In his book The Gold Cartel (published by Palgrave Macmillan, see link on the right hand side), commodities expert Dimitri Speck discusses gold price manipulation and modern-day credit excess. His commodities trading strategy Stay-C has won awards all over Europe. He is the publisher of the web site Seasonal Charts as well as of the Bloomberg app Seasonax and Head Analyst of the 90 Tage Trader Letter.

 


 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

One Response to ““Sell in May and Go Away” – in 9 out of 11 Countries it Makes Sense to Do So”

  • Hans:

    Fine write up, Mr Speck! For those whom continue with
    their summer investments, perhaps a good strategy would
    be the “sell to open options.”

    It is not uncommon to receive a 6% premium over a 90 day
    period, albeit it does entail some potential liabilities.

    The summer season could also be used to reposition ones
    portfolio.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • The Gold Sector Remains at an Interesting Juncture
      Technical Divergence Successfully Maintained In an update on gold and gold stocks in mid June, we pointed out that a number of interesting divergences had emerged which traditionally represent a heads-up indicating a trend change is close (see: Divergences Emerge for the details). We did so after a big down day in the gold price, which actually helped set up the bullish divergence; this may have felt counter-intuitive, but these set-ups always do. Consider now the updated chart below...
  • Confronting the Dragon with Peter Navarro
      Of No Real Use A young man might go to business school believing he is obtaining some sort of academic training that will enable him to make a comfortable living.  His degree may gain him entry into a large corporation, where he can work his way up to a good income.  This may even put him on the fast track to what he envisions as success.   Don't knock it: Being useless can lead to unexpected career opportunities... [PT]   But his academic training likely won't...
  • Trouble in Paradise
      Impressive Zeal for Faded Ideals Uncompromising independence, rugged individualism, and limitless personal freedom were once essential to the American character.  According to popular American folklore, they still are.  We have some reservations.   Rugged individualists suffer mid-life identity crisis. [PT]   The principles that gave rise to the American character died long ago.  Freedom.  Liberty.  Independence.  Limited representative government. Sound...
  • Gold – Macroeconomic Fundamentals Improve
      A Beginning Shift in Gold Fundamentals A previously outright bearish fundamental backdrop for gold has recently become slightly more favorable. Ironically, the arrival of this somewhat more favorable situation was greeted by a pullback in physical demand and a decline in the gold price, after both had defied bearish fundamentals for many months by remaining stubbornly firm.   The eternal popularity contest...   The list of gold fundamentals that have improved is...
  • The United States of Terror
      Bombs Away! Two recent articles* have again demonstrated that the greatest “terrorist” entity on earth are not the bogymen – Russia, China, Iran, North Korea – so often portrayed by Western presstitutes and the American government, but the United States itself!   This is an old cartoon, but still a good one. It perfectly describes the trigger-happy Western political class and the depth of its “thinking”. By happenstance we recently reviewed the Libya intervention...
  • Capitulation and Currency Pain - Precious Metals Supply and Demand
      Waving the White Flag The price of gold rose two bucks last week, though the price of silver fell 10 cents. We have seen several analyses recently predicting big price drops, in one case by at least $500 in gold by the end of the year. Is this what capitulation looks like? It’s said they don’t ring a bell at the top, but they don’t ring a bell at the bottom either.   The give-up moment arrives... [PT]   We have also seen technical analysis arguing that...
  • Maurice Jackson Interviews Rick Rule – Investing in Natural Resources
      Contrarian Investment Opportunities in Natural Resources Maurice Jackson of Proven and Probable has recently interviewed Sprott U.S. Holdings CEO Rick Rule, a well known specialist and “old hand” in the natural resource space. This is quite a wide-ranging and interesting interview, so we decided to present it to our readers. Below you find a summary and our comments on the main topics discussed, a video/podcast of the interview,  as well as a download link to a PDF file of the...
  • The True Sport of MAGA
      Chest Bumps One of the more extraordinary things that investors have seen in living memory is unfolding at this precise moment. This goes for business leaders, money managers, veteran Wall Streeters, value investors, 401(k) holders, momentum traders, FX guys, gold bugs, technical gurus, chartists, pork belly speculators, quants, astrologists, Larry Summers, put option sellers, dweebs and geeks, millennial index fund enthusiasts, and everyone in between.   Pork belly speculators...
  • Black Holes for Capital - Precious Metals Supply and Demand
      Race to the Bottom Last week the price of gold fell $17, and that of silver $0.30. Why? We can tell you about the fundamentals. We can show charts of the basis. But we can’t get into the heads of the sellers.   Other people's fiat: in the global race to the bottom, it was recently the turn of emerging market currencies to tank. [PT]   We can say that in the mainstream view, the dollar is rising. The dollar, in their view, is not measured in gold but in rupees in...
  • US Money Supply and Fed Credit – the Liquidity Drain Becomes Serious
      US Money Supply Growth Stalls Our good friend Michael Pollaro, who keeps a close eye on global “Austrian” money supply measures and their components, has recently provided us with a very interesting update concerning two particular drivers of money supply growth. But first, here is a chart of our latest update of the y/y growth rate of the US broad true money supply aggregate TMS-2 until the end of June 2018 with a 12-month moving average.   US TMS-2: y/y growth rate with...

Support Acting Man

Item Guides

j9TJzzN

The Review Insider

Dog Blow

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com