Sell In May?

Tyler Durden's picture

As readers will recall from our recent preview of what equity performance this month was supposed to look like, at least based on historical data, April was supposed to be the best month of the year.

Sadly for the bulls, it has been anything but. That's the good news. The bad news is that as most know the old saying "sell in May and go away", there is nothing but pain for the next six months.

As FBN's JC O'Hara explains, the “Sell in May” slogan heard around Wall Street has some truth behind it. The gist of the saying suggests it’s better to be out of the market come May and re-enter during the fall months.

We ran the numbers over the last 20 years and found validity to the statement. We created a model that went long the market Jan, Feb, March, April, Oct, Nov & Dec. as well as a second model that went long the market May through Sept 30. We concluded that the May – Sept time period model, on average over the past 20 years, would have lost you money. The majority of the time the market was unimpressive over those summer months. The majority of the markets returns were housed in the first model that was long the months into May and the months after Sept. While there were instances where May – Sept was negative, the risk adjusted returns suggests investors do not necessarily need to exit the market but should expect flat markets with little if any of the yearly gains coming during this time period. The real money was made during other 7 months of the year. As we approach May we are not in the SELL camp yet, but rather acknowledge the fact that a volatile, stagnant, sideways moving market is what history implies. Over the next few pages of this report we examine the past 20 years and highlight where the majority of returns are found.

Naturally, all of the above implies that rigged, centrally-planned markets are even remotely comparable to normal historical markets, and trade paterns. They aren't. Still, for those who are curious what the infamous Sell in May phenomenon looks like, here it is:

 

And the full breakdown of the past 16 years:

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Slave's picture

More like BTFATH in May.

Soul Glow's picture

Gold - BTFD.  

Sell equity, sell bonds, sell the dollar.  Buy gold, buy silver.

Funny Money's picture

Sweet.  Is the sky finally going to fall?

Soul Glow's picture

And get the fuck outta Dodge.

SGS's picture

sell NFLX and buy geiger counters

Yen Cross's picture

 Based on Q-1(nonGAAP) earnings and FX macro flows. I'd say it's fairly safe to assume the ponzi clowns will delve even deeper<>

  I'm long "unwinding of risk".

Soul Glow's picture

At this point it is easy to think the Masters of the Universe can do whatever they will, yet please remember, even during crashes they must place their bets correctly.  What that means is during the crash of '08 the President's Wotking Group was likely short the market, this because their mandate is to do what is in the interest of the market, and going with the grain will have a lasting benefit.  This of course is short term behavior even if conditioned for long term policy.  This happens because economic policy is flawed - rational consumer theory et al.  So now you see that the House of Cards can fall at any time.

Good luck trading!

Yen Cross's picture

I've unfortunately been shorting (MBS contracts for over 8 months)

 Do I expect to get paid? Maybe 20% on the dollar.

Oh regional Indian's picture

Did the first shoe fall yet?

Is the fat lady warming up?

 

Wahooo's picture

Nice interview with Doug Kass in Barrons today (okay, don't stop reading here). Doesn't like the yield curve, doesn't like valuations against inflated profit margins, doesn't like peaking productivity, doesn't like what the rotation out of high-beta stocks and into value stocks means, is short Tesla and doesn't like JPM or BAC. I thought I was reading ZH!

Spitzer's picture

Contrarianism is dead. Technicals are dead. Fundamentals are dead. Buy and Hold is dead. Reality is dead.

 

Georgia_Boy's picture

I wonder if the overall pattern is caused by when new retail (ie, muppet)money is available. I'm in the prime earning and spending years now, wife/mortgage/older kids, and find I have much less money to spare starting after tax day until a couple weeks after school starts. It's not just sumertime bills like vacay themselves ... like a lot of people, I bought my house and moved in during the summer, so some yearly bills like homeowners insurance and car insurance (since I located to here from out of state) come due in the summer, can't think of all the bills offhand but it just seems like I'm more short of positive cash flow during exactly the season they're talking about.

Flux's picture

See, this is why Zero Hedge is full of shit.

They just posted a previous article saying how the "Away in May" hasn't occured in the last 4 years... but now its in full effect again?

Or is it just that the sky is always falling?

Yeah, got it.

And FWIW, I'm doing fine in April. Canadian market and REITS are my winners.

 

Yen Cross's picture

  Hey flux?  Are ya listening?   Canadian "car clowns" sellers, should change their odometers EHH?

james.connolly's picture

A real MAN call's ZH on the BS, and then you get a response from BOT-1, BOT-2, or BOT-3, ..aka fonestar, banzai, or yenny,

Telling,

Maximize GOOGLE clicks is the bitch, ... and anything else walks, if you want real rhetoric with a HUMAN, then ZH is the last place on earth a MORTAL would look.

Ralph Spoilsport's picture

Here, in the technical vastness of the future, such concepts as historical data are surely old age thinking. We're all, up against the wall, of science.

Kirk2NCC1701's picture

At the risk of (once again!) having to state the obvious: Buy whatever the Richest man in China" bought, when he sold all his $34B in Chinese holdings.

* http://www.zerohedge.com/news/2014-04-16/richest-man-asia-selling-everyt...

Yen Cross's picture

 My asshole stinks after 2 weeks.

  Long live the "Fight Club"

litemine's picture

I am far from a 1% and own some stocks. The way I look at it I own a certain percentage of the Company and that doesn't change, does it?  It depends on what you own a part of, I am buildin my own retirement.....hoping to get enough before I need it.......sorry but I just think that is wise on my part.

If everyone bails , the prices drop and then the real scam could buy everything. No? 

kurt's picture

On a misty morning as the shadows turn to light, a loamy path rumbles then roars, doppler shift, red number one speeds by. Out of the vapors and into the past. Go Duke Boys!

flow5's picture

President Wilson signed “The Federal Reserve Act” into law on December 23, 1913. The Act, "Provided for the establishment of Federal Reserve Banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes".

"It was anticipated that credit extended by the Federal Reserve Banks to commercial banks would rise and fall with seasonal and longer term variations in business activity"

"Seasonality" (principally the holidays), is the result of the FOMC’s seasonal mal-adjustments (& has its roots in the fallacious "Real Bills Doctrine”). The FED through its "open market power" has the capability of either adding or subtracting to the volume of money in circulation. But the non-bank public determines its mix (currency vs. bank deposits). 

This policy is reflected by changes in the Depository Financial Institution’s (DFI), required reserve balances.  RRs are based on transaction type accounts 30 days prior.  Thus RRs provide the seasonal map (economic time series’ cyclical trend).  It is further scientific proof.

Kuanyeah's picture

The wisdom of S I M A G A (sell in May and go away)

polo007's picture

According to Tullett Prebon Group Limited:

http://www.tullettprebon.com/Documents/strategyinsights/TPSI_009_Perfect_Storm_009.pdf

perfect storm

energy, finance and the end of growth

Summary

The economy as we know it is facing a lethal confluence of four critical factors – the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy-returns cliff-edge.

Through technology, through culture and through economic and political change, society is more short-term in nature now than at any time in recorded history. Financial market participants can carry out transactions in milliseconds. With 24-hour news coverage, the media focus has shifted inexorably from the analytical to the immediate. The basis of politicians’ calculations has shortened to the point where it can seem that all that matters is the next sound-bite, the next headline and the next snapshot of public opinion. The corporate focus has moved all too often from strategic planning to immediate profitability as represented by the next quarter’s earnings.

This report explains that this acceleration towards ever-greater immediacy has blinded society to a series of fundamental economic trends which, if not anticipated and tackled well in advance, could have devastating effects. The relentless shortening of media, social and political horizons has resulted in the establishment of self-destructive economic patterns which now threaten to undermine economic viability.

We date the acceleration in short-termism to the early 1980s. Since then, there has been a relentless shift to immediate consumption as part of something that has been called a “cult of self-worship”. The pursuit of instant gratification has resulted in the accumulation of debt on an unprecedented scale. The financial crisis, which began in 2008 and has since segued into the deepest and most protracted economic slump for at least eighty years, did not result entirely from a short period of malfeasance by a tiny minority, comforting though this illusion may be. Rather, what began in 2008 was the denouement of a broadly-based process which had lasted for thirty years, and is described here as “the great credit super-cycle”.

The credit super-cycle process is exemplified by the relationship between GDP and aggregate credit market debt in the United States (see fig. 1.1). In 1945, and despite the huge costs involved in winning the Second World War, the aggregate indebtedness of American businesses, individuals and government equated to 159% of GDP. More than three decades later, in 1981, this ratio was little changed, at 168%. In real terms, total debt had increased by 214% since 1945, but the economy had grown by 197%, keeping the debt ratio remarkably static over an extended period which, incidentally, was far from shock-free (since it included two major oil crises).

Pseudonymous's picture

If you like your -4% piece of the pie, you can have your -4% piece of the pie... and eat it too!