Sell in May and Go Away — Myth or Real Signal?

Every year around May, the old stock market adage resurfaces: "Sell in May and go away." The idea is simple — sell your equities, sit out the summer, and buy back in autumn. It sounds like outdated folklore. But the data behind it is more solid than most people expect.

Let's look at what the research actually shows — and then what it means in practice for a dividend-focused, hard-asset investor.

1. The Seasonality Effect Is Real — Fact, Not Folklore

Bouman & Jacobsen documented this in the American Economic Review in 2001: in 36 out of 37 markets studied (1970–1998), returns from November through April were statistically higher than from May through October — even after accounting for transaction costs. This is the so-called Halloween Indicator, named after the approximate start of the stronger winter half.

A follow-up study by Jacobsen & Zhang covering 108 markets, 323 years, and 62,962 monthly observations reinforced the finding: winter-half returns (November–April) averaged 4.2 percentage points higher than summer-half returns (May–October). Statistically robust — across centuries, across virtually every market.

Why does this effect exist? Several explanations have been proposed: institutional investors reduce risk exposure over summer, lower trading volumes during vacation season dampen momentum, and seasonal profit-taking after strong spring runs. No single cause is fully proven — but the effect itself is.

2. Yet Selling Still Underperforms Buy-and-Hold

Here is the catch. Yes, the winter half statistically beats the summer half. But acting on that by selling is still the worse deal.

Since 1950, buy-and-hold in the S&P 500 has delivered roughly 8.05% per year (CAGR). A consistent Sell-in-May strategy — selling every May and buying back in November — came in at 6.86% per year over the same period (source: IncomeShares). That sounds like a small gap, but compounded over 30 or 40 years it translates into a very large capital difference.

A second data point dismantles the strategy further: over the past 50 years, the summer period (May–October) was positive in 38 out of 50 years, averaging +4.25% (source: FundCalibre). Sell in May would have added nothing — except transaction costs and capital gains taxes — in 38 out of 50 cases.

2025 was a prime example: the summer ran strong — particularly commodities and precious metals. Anyone who had sold in May sat out a meaningful rally.

3. Why "Go Away" Still Contains a Useful Signal

Here is my personal take — this is my view, not a verified fact.

My view: The mistake is not with the seasonality effect itself, but with the wrong conclusion drawn from it. "Go away" does not mean panic-selling everything. For me it means: discipline in adding new positions.

I hold quality companies with ongoing dividends — shipping, mining, energy, pipelines. You do not dump those positions because of a calendar saying. The tax cost alone on realised capital gains eats up most of whatever you might gain from summer avoidance. Add in this: the best single trading days of the year often fall in summer. Miss them and you pay for it long-term.

In practice: if a position I already hold has had a strong spring run and the risk/reward has deteriorated, I reduce new buying. I do not chase. Not because of the calendar — because of valuation. Summer is the natural moment to reassess that.

4. The Hard-Asset Perspective: Seasonality Works Differently Here

Classic dividend stocks in commodities, shipping, or energy have their own seasonal patterns that diverge from the broad market. Tanker rates often run stronger in winter (heating oil demand, weather disruptions). Mining stocks are more tightly tied to commodity cycles than calendar patterns. LNG demand has its own seasonality around cold-weather peaks.

This means: investors focused exclusively on hard assets and dividend payers do not experience the homogeneous summer weakness that broad-index investors face. The academic data applies to the broad market — it does not translate one-to-one onto a concentrated portfolio in shipping, mining, and upstream energy.

5. Bottom Line: Seasonality as a Checklist, Not a Rule

Is the seasonal effect real?	Yes — academically confirmed (2001, 323-year study)
Does Sell in May beat buy-and-hold?	No — 8.05% vs. 6.86% p.a. long-term
Is summer usually positive?	Yes — 38 of 50 years positive, avg. +4.25%
Right response for dividend investors?	Build cash buffer, be more selective on new buys, stay anticicyclically ready
Sell quality holdings?	No — taxes, forfeited dividends, missing best days

"Sell in May and go away" is not a dumb saying — it has a real statistical core. But the wrong conclusion, namely selling everything and sitting in cash, costs long-term returns. The right conclusion: look more carefully in summer, buy less aggressively, stress-test valuations more critically.

Frequently Asked Questions

Is Sell in May and go away backed by research?

Yes. Bouman & Jacobsen (American Economic Review, 2001) found significantly higher returns from November to April in 36 out of 37 markets studied (1970–1998), even after transaction costs. A follow-up study covering 108 markets and 323 years confirmed: winter-half returns averaged 4.2 percentage points higher than summer-half returns.

Does selling in May outperform buy and hold?

No. Since 1950, buy-and-hold in the S&P 500 delivered roughly 8.05% per year (CAGR). The Sell-in-May strategy came in at 6.86% per year (source: IncomeShares). Selling also triggers capital gains taxes and forfeits dividends paid during the summer months.

How often is the summer (May–October) actually negative?

According to FundCalibre data over the last 50 years, the summer period was positive in 38 out of 50 years, averaging +4.25%. The strategy only provided meaningful protection in 12 out of 50 years.

Related Strategy Articles

• Dividend Strategy – Cashflow from Hard Assets
• Hard Asset Guide – Why Real Assets?
• Commodity Supercycle 2025–2035
• Shipping Stocks – Full Sector Guide
• 36 Stocks Watchlist 2026