Buy Stocks in May, Sell in Summer for Best Gains: Bank of America
Bank of America says it might be time for a new way of thinking about a longstanding bit of investment advice.
In a recent note to clients, the bank said it was brushing aside the adage to “Sell in May and go away” — at least for this year.
The idea behind the saying is that investors should get out of the market from May to October, a period known for being the S&P 500’s weakest six-month stretch of the year. But that wisdom doesn’t hold up when looking at the data, and investors may want to hold on to see stronger gains through the summer, analysts at the bank wrote, citing their analysis of stock prices stretching back over the past 98 years.
The May through October period has historically been the most challenging for the S&P 500. Over the last century, the benchmark index gained an average 2.4% during those six months, the lowest return compared to any other six-month period of the year.
But weakness in the May-October period is often “back-end loaded,” the BofA analysts said. On average, the S&P 500 shed 0.2% during the August to October period, the worst return of any three-month period.
Meanwhile, in the second year of the presidential cycle, the S&P 500 has ended in the green 60% of the time, per BofA’s analysis.
Gains in the market have been particularly pronounced in the tech sector, with the Nasdaq 100 gaining 68% of the time and posting an average increase of more than 2% in May.
“We do not see this bias,” the bank said of the original wisdom to sell stocks mid-spring. “In fact, we could argue that seasonality favors buying in May and selling.”
“It is not ‘sell in May and go away’ but rather ‘buy in May and sell in July/August,'” they added.
Stocks have rebounded over the last month as investors have priced in more optimism surrounding the Iran war and potential peace deal. New bullishness about AI has also helped tech recover after a tough first quarter.
The S&P 500, which tumbled 9% through its low in late March, has soared more than 13% as the US and Iran have struck a ceasefire and President Donald Trump has teased an end to the conflict, posting on Tuesday that Iran has asked the US to help reopen the Strait of Hormuz.
