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‘Sell in May and go away’ still holds true: eToro

By Jessica Penny
4 minute read

New research has shown that selling can, in fact, be “in” or “out” of season.

A recent analysis by eToro looked at the monthly price returns of 15 of the world’s largest stock indices, spanning an average of 50 years, to investigate the validity of the adage “sell in May and go away”.

The monthly average price return across all markets from November to April stood at 1.2 per cent, without any negative months. However, this figure dropped significantly to just 0.1 percent from May to October, marked by three months with average negative returns.

This seasonal discrepancy was observed consistently across all 15 markets, with none of the indices demonstrating stronger returns during the latter period.


“Looking back at the numbers provides insight into why the ‘sell in May’ adage has endured for so many years,” Ben Laidler, global markets strategist at eToro, said.

Even though some believe the trend to be a “self-fulfilling prophecy”, Laider noted multiple factors contributing to this seasonal occurrence.

“Firstly, there is often positive company guidance on the full year outlook seen in Q1, boosting share prices,” he said.

“We also see a lot of investors reposition portfolios in Q4 in preparation for the upcoming year and the well-established January price effect. Summer months lack these positive influences, alongside generally lower trading volumes.”

Laidler noted that this phenomenon is also noticeable in Australia, where June to August, typically considered summer months in the US, coincide with winter locally.

While this period is associated with more holidays, sporting events, and a generally busier social calendar for the Northern Hemisphere, the trickling effect into Australia reflects the increasing globalisation of equity markets.

Namely, looking at the ASX 200, average monthly returns between November and April sit at 0.89 per cent, while between May and October, the figure is 0.06 per cent.

Australia’s 0.83 percent difference between the two periods positioned the country in the lower half of the pack among the world’s largest indices. The most significant price seasonality was observed in markets with higher beta, indicating greater volatility compared to the broader global market.

For example, the Italian FTSE MIB and the mid-cap index UK FTSE 250 experienced some of the highest average seasonal return differences with 1.8 per cent and 1.7 per cent, respectively.

In contrast, some major US indexes – whose price swings are generally less extreme than the global average – experienced smaller seasonal return differences, such as the S&P 500 (0.78 per cent), the Nasdaq (0.76 per cent), and the Wilshire small-cap index (0.96 per cent).

However, this year, the annual seasonality trend may have arrived early, according to Laidler.

"After a six-month period of remarkable strength, the US stock market has experienced a notable recent downturn, fundamentally driven by delayed US interest rate cut expectations.”

“But with investors also well aware that weaker ’sell in May and go away’ seasonality is just around the corner. We see this all as a needed pause for breath in the early innings of a new bull market,” he concluded.