Why traders still talk about sell in May and go away

Every year around April, you may hear the phrase 'sell in May and go away'. It is one of the oldest sayings in markets. This page explains what it means, where it came from and why it should be treated with caution.

Quick answer

'Sell in May and go away' is an old market saying that suggests shares tend to do worse from May to October than from November to April. The idea is to sell before summer and return later in the year. Some studies found such a seasonal gap in certain markets and periods, but it is not consistent, and following it blindly can mean missing gains.

Key takeaways

• The saying suggests selling in May and returning around November.
• It comes from an old London market saying.
• It is also called the Halloween indicator.
• Evidence is mixed across markets and years.
• Indian markets have their own seasonal factors like the monsoon.

What does sell in May and go away mean?

The saying suggests that the period from May to October is weaker for shares than the period from November to April. Followers of the idea would sell shares in May, hold cash or safer assets, and buy back around the end of October.

The full old version in London was 'Sell in May and go away, come back on St Leger's Day', which referred to a horse race held in September. In the past, wealthy traders left the city for the summer, and trading slowed.

Is there any evidence behind it?

A 2002 study by Sven Bouman and Ben Jacobsen looked at many countries and reported that returns from November to April were often higher than from May to October in their sample. They called it the Halloween indicator, since the switch back happens around 31 October.

Other researchers have questioned how strong and stable the pattern is. Results change depending on the market, the years studied and the costs included. Past patterns are not indicative of future results.

Why should investors be careful?

Selling and buying back every year adds costs like brokerage, taxes and slippage. It can also mean missing a strong summer rally, which does happen in some years.

Market timing based on the calendar alone ignores company results, valuations and the economy. Staying out of the market for six months each year is a big decision to base on an old saying.

Does sell in May apply to India?

Indian markets have different seasonal drivers. The monsoon from June to September affects farm output and rural demand. Quarterly results, the Union Budget and flows from foreign investors also move prices.

So a saying from London or New York may not match Indian conditions. Each year is different, and the factors that move Indian shares change from year to year.

The key point to remember

'Sell in May and go away' is a well-known seasonal saying with mixed evidence. It is useful to know as part of market folklore, but it is not a reliable rule for making investment decisions.

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