“Sell In…” May Be Sound Advice This Year
Our good friend and fund manager Dana Lyons consistently produces some valuable research on historic trends for the markets. We hear a lot of investing sayings that sometimes are nothing more than noise and other times dismissed when they shouldn’t be. That brings up to the “sell in May and go away” saying. Below is some historic data that shows this year this saying should be noted.
Click here to visit Dana’s free blog. Even better click here to visit Dana’s more investment focused site The Lyons Share.
…Here’s the posting…
There is some evidence to suggest that stock investors would be well served by selling in May and going away this year.
One of the most famous of all of Wall Street’s trading bromides is “Sell In May & Go Away”. Of course, the saying refers to the tendency of stocks to perform worse during the 6 months from May through October than they do from November through April. Perhaps the reason why it is still so popular is that, unlike some of Wall Street’s other sayings, there is actually solid historical evidence to back it up, including recent history.
Specifically, here are the average returns in the Dow Jones Industrial Average during the 2 periods since 1900:
November-April: +5.45%
May-October: +1.61%
Not only does the average return for the May-October period lag badly, but the consistency of positive returns has been less reliable:
November-April: 69% Positive Returns
May-October: 61% Positive Returns
Plus, as mentioned, unlike many seasonal tendencies that lose their effectiveness over time as the edge gets arbitraged away, the Sell In May pattern has held true even as of late. For example, 7 of the last 8 years, 11 of the last 13 years and 19 of the last 24 years saw the Dow stronger from November-April than from May-October.
So is there any thing that bulls can hang their hat on during the forthcoming 6 months? Well, first of all, despite the fact that May-October has generally lagged its 6-month counterpart, the historical average return for the period is still positive. So it’s not like the whole period has been a disaster, though there have certainly been some of those.
In parsing the data, however, we have found one historical trend that may suggest that the “Sell In May…” advice may be better served this year than most. It is based on the (also relatively consistent) 4-year Presidential Cycle. Naturally, the average Sell In May returns are not uniform across all years. And specifically, we see dispersion, and a wide one at that, among the 4 years within the Presidential Cycle. For example, during “Year 4’s”, the May-October average returns actually exceed those of the November-April period.
It is a different story in “Year 2’s”, however. In fact, at +0.00%, the average May-October return during Year 2’s is the worst of any of the 4 years.
We will say that this seasonal tendency is far down on the list of decision-makers for us as it pertains to these upcoming 6 …read more
Source:: The Korelin Economics Report
The post Dana Lyons Commentary – Fri 4 May, 2018 appeared first on Junior Mining Analyst.
From:: Junior Mining Analyst