There’s an old Wall Street saying that investors should “sell in May and go away.” Recent years have been excellent examples. Last year, the stock market peaked on April 29 and in 2010, it peaked on April 23. This year, the S&P 500 is down since April 2.
I recently crunched all the Dow’s daily closing going back to 1896 and found that there is, indeed, a mild seasonal effect. The chart below shows what the Dow has done, on average, throughout the year. Historically, the Dow hits a peak on May 6 and pulls back an average of 1.33% by May 25. The chart shows that even by October 27, the Dow has advanced just 0.34% from May 6. This means that the market is nearly flat for slightly more than one-third of the year. Excluding that period, that has gained an average of 7.5% for the rest of the year.
Posted by Eddy on April 11th, 2012 at 1:34 pm
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Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 for the last five years in a row. (more)
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