Analysis: Sell in May and go away? Think again | CNN Business (2024)

Analysis: Sell in May and go away? Think again | CNN Business (1)

Traders work on the floor of the New York Stock Exchange during afternoon trading on April 09, 2024 in New York City.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign upright here. You can listen to an audio version of the newsletter by clicking the same link.

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It’s “sell in May and go away” season. Not everyone is jumping on the bandwagon.

The Wall Street maxim, popularized by The Stock Trader’s Almanac, suggests investors should sell their equity holdings this month and re-enter the market in November, based on the historical tendency of stocks to underperform between May and October compared with the November to April period.

Some investors might be tempted to gut their holdings after a bruising April. All three major indexes broke five-month winning streaks as hotter-than-expected inflation data stoked fears that interest rate cuts will come later than forecast. The Dow Jones Industrial Average index fell 5% in April, logging its worst month since September 2022. The S&P 500 and Nasdaq Composite declined 4.2% and 4.4%, respectively.

One trading session into May, the market has continued to struggle. Stocks on Wednesday gave up most of their gains after initially surging when Federal Reserve Chair Jerome Powell said that policymakers were unlikely to hike rates again. The central bank kept interest rates on hold at a 23-year high at its policy meeting.

But some traders warn that attempting to time the market seldom works and that the “sell in May” adage is outdated.

“Blowing out of your portfolio before the summer starts is not a recipe for success. Even with all the perils you could list we are facing, that isn’t any different than any point of time in our history,” wrote Alex McGrath, chief investment officer for NorthEnd Private Wealth, in a Monday note.

One sticking point for Wall Street? Persistent inflation has kept long-anticipated rate cuts on the backburner. Traders now expect the Fed to cut rates once or twice in 2024, after expecting as many as six cuts earlier this year, according to the CME FedWatch Tool.

But investors say that far-off rate cuts are far from a death knell for stocks. The economy has stayed robust despite one softer-than-expected GDP reading. Consumers are continuing to spend, the labor market remains solid and companies have reported robust earnings growth.

“Although Fed rate cuts may be delayed, if the economy and consumer stay strong, early rate cuts should not be necessary,” wrote Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, in a Tuesday note.

While some on Wall Street also fear that stocks could see more volatility closer to election day in November, stocks have historically rallied during the summer in presidential election years. The S&P 500 rose 2.3% on average during the May to October period during election years and was higher 77.8% of the time, according to Carson Group data going back to 1950.

Still, some stocks have tended to perform better than others during the year’s hotter months. The S&P 500’s consumer staples and health care sectors have climbed 4.1% on average during the May to October timeframe since 1990, outperforming the broader market’s 2.1% advance, according to CFRA Research.

The Fed keeps interest rates at a 23-year high

The Federal Reserve said Wednesday it is holding interest rates at their current levels, as hotter-than-expected inflation data continues to push back the timing of the first rate cut, reports my colleague Bryan Mena.

Fed officials have kept their benchmark lending rate at a 23-year high since July, after aggressively raising rates starting two years ago.

Officials have said they need to have enough confidence thatinflationis under control before lowering borrowing costs, but the latest figures show “there has been a lack of further progress,” according to their latest policy statement.

TheFedalso announced Wednesday it is easing its grip on theeconomybyshrinking its massive multitrillion-dollar balance sheet at a slower pace.The central bank’s main tool is its key interest rate, but it also uses its balance sheet to either help stimulate or slow theeconomy, and it’s been doing the latter to fightinflation.

Starting in June, theFedwill let up to $25 billion in Treasuries from its portfolio mature each month without replacing them, down from $60 billion a month currently.

Read more here.

Tesla axes electric vehicle charging team

Tesla has abruptly fired the team running its electric vehicle charging business, raising doubts about the future of one of the largest US charging networks, which other carmakers, such as General Motors and Ford, have said they will also use.

In social media posts Tuesday, several Tesla employees confirmed the layoffs, first reported by The Information.

Tesla “has let our entire charging org go,” William Navarro Jameson, strategic charging programs lead at Tesla, wrote on X.

In a post on LinkedIn, Lane Chaplin, a senior manager in Tesla’s charging division, wrote: “In the middle of the night, I learned, along with all my #Tesla Global #Charging colleagues, the Tesla Charging org is no more.”

A lack of charging infrastructure is one of the main barriers to widespread EV adoption, and Tesla’s extensive “Supercharger” network has long been a major selling point for its vehicles, report my colleagues Hanna Ziady and Peter Valdes-Dapena.

Until recently, that network could only be used by Tesla vehicles.

Read more here.

Analysis: Sell in May and go away? Think again | CNN Business (2024)

FAQs

Analysis: Sell in May and go away? Think again | CNN Business? ›

The Wall Street maxim, popularized by The Stock Trader's Almanac, suggests investors should sell their equity holdings this month and re-enter the market in November, based on the historical tendency of stocks to underperform between May and October compared with the November to April period.

What is the sell in May and go away analysis? ›

"Sell in May and go away" is an old market adage, popularized by the Stock Trader's Almanac, revealing the best six months of the year for stocks (they used the Dow Index) occurred from November through April. It suggested investors should sell in May and wait until November to buy back into the markets.

Do stocks usually go up in May? ›

According to Dow Jones Market Data, the S&P 500 is up 4% on average during May through October over both the past five and 10-year periods.

Why you shouldn't sell during a recession? ›

Markets begin to stabilize and see positive growth over the long run. You can stay invested and even accumulate more shares when prices are low. These opportunities aren't available to investors who sell during market downturns, hoping to stem their losses and wait things out on the sidelines.

Why do companies sell off? ›

Summary. A selloff is a rapid and sustained sale of a large volume of securities, leading to a decline in its price. It may be caused by various factors, such as a report of declining earnings, the threat of new technologies, natural disasters, or an increase in the price of raw materials.

What is the quote Sell in May and go away? ›

"Sell in May and go away" is an adage referring to the historically weaker performance of stocks from May to October compared with the other half of the year. Since 1990, the S&P 500 has averaged a return of about 2% annually from May to October, versus about 7% from November to April.

What is the historical return of Sell in May and go away? ›

Statistics on this Strategy

According to the Stock Trader's Almanac, the Dow Jones Industrial Average has gained an average of 7.5% during the November-April period since 1950. Its average return has been only 0.3% during the May-October period in those same years.

Why shouldn't you sell stocks in May even if you go away? ›

"Sell in May and go away" is a stock market adage suggesting investors bail on stocks in the summer months, when returns tend to moderate, and reinvest in the fall. While history shows stocks generally perform better in the colder months, financial advisors don't recommend embracing a sell-in-May strategy.

Is May historically good for the stock market? ›

The S&P 500 averages a decline of 0.1% usually in May, according to Dow Jones Market Data, which noted that May is typically the second worst-performing month of the year (see chart below). That historical performance helps explain the popular Wall Street adage, "Sell in May and go away."

Is May a good month to buy stocks? ›

The old saying, "Sell in May and go away" is not just folklore — stock market history supports it. History shows stock market performance tends to sag from May to October compared with the November-April period. Still, investors can expect low single-digit gains over the next six months.

What business to avoid during recession? ›

But certain businesses are more recession-proof than others. Five businesses to avoid starting during a recession include luxury retail, hospitality, manufacturing, construction, and home services. We'll explain why and go into some of the advantages and disadvantages of opening a business during a downturn.

What sells the most in a recession? ›

Toothpaste, deodorant, shampoo, toilet paper, and other grooming and personal care items are always in demand. Offering these types of items can position your business as a vital resource for consumers during tough times. People want to look good, even when times are tough.

Should you rebalance in a down market? ›

You should consider adopting a portfolio rebalancing strategy—even during down markets when it's tempting to let your “winners” keep growing while your “losers” are taking their lumps. That's because rebalancing helps you buy low and sell high—an investing adage that's easy to say and hard to do.

Why are the rich selling their stocks? ›

The reason behind this move is to secure their wealth amidst rising interest rates and economic uncertainty. Similar issues are still ongoing to this day.

When to sell a stock for profit? ›

When to sell a stock: 7 good reasons
  1. You've found something better. ...
  2. You made a mistake. ...
  3. The company's business outlook has changed. ...
  4. Tax reasons. ...
  5. Rebalancing your portfolio. ...
  6. Valuation no longer reflects business reality. ...
  7. You need the money. ...
  8. The stock has gone up.
Apr 19, 2024

Should I get out of the stock market? ›

While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.

What does Sell in May and go away but remember to come back in November? ›

The phrase refers to an investment strategy for stocks based on the theory that the stock market underperforms in the six-month period between May and October. In contrast, the period between November and April sees much stronger stock market growth.

What does Wall Street say about selling in May? ›

That historical performance helps explain the popular Wall Street adage, "Sell in May and go away." The period from May to November is historically the weakest for the market, though analysts and investors have argued that the saying oversimplifies the phenomenon.

What is the expression sell in May? ›

Sell in May and go away is an investment strategy for stocks based on a theory (sometimes known as the Halloween indicator) that the period from November to April inclusive has significantly stronger stock market growth on average than the other months.

Does sell in May work? ›

"Sell in May and go away" is a stock market adage suggesting investors bail on stocks in the summer months, when returns tend to moderate, and reinvest in the fall. While history shows stocks generally perform better in the colder months, financial advisors don't recommend embracing a sell-in-May strategy.

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