The Stock Market in May

It’s Sell in May time again. Already! Often stock market sayings turn out to be unreliable, at best. But the Sell in May aphorism is spookily accurate. It describes the tendency of the market to be weaker from May to October than it is for the other six-month period of the year. How true has this been? Well, in the last 33 years the saying has been right 28 times, and the average annual out-performance of the November-April period since 1982 has been 8.6%. Very few trading systems can match that record.

Monthly returns of FTSE All Share Index - Mayl (1984-2015)

Sell in May

Usually stock market anomalies, once they have been identified, don’t last long. But the Sell in May effect has been around for decades ­ one academic paper found evidence of it in the UK market starting from 1694. And the effect is currently as strong as ever. For example, for the latest period: the FTSE All Share Index was up 7.3% over the six-month period Nov 2014 to Apr 2015 and down 7.3% for the following period May 2015 to Oct 2015 (a rather oddly symmetrical performance!)

Given the strength of the Sell in May effect it is not surprising that May itself is one of the weakest months of the year for shares. There are only three months where, since 1970, the market has an average return of below zero in the month – May is one of them (the others are June and September). On average the market falls -0.2% in the month, and the probability of a positive return in the month is below 50%. Since year 2000 performance has been even worse, with an average return of -0.6% for the month.

It’s not immediately obvious why May has been historically weak for the stock market. The month is weak for most stock markets worldwide, so whatever the reason it’s unlikely to be anything UK-specific, such as the timing of the UK’s financial year.

The average market in May

On average in May the market trades fairly flat for the first two weeks of the month, and then prices drift lower in the second half ending with the weakest day of the year for shares on 30 May (although the LSE will be closed this year on that day for Spring Bank Holiday).

May is the weakest month of the year for the FTSE 100 Index relative to the S&P 500 Index; on average the UK index under-performs the US by 1.9 percentage points in May.


Over the last ten years, strong sectors relative to the general market in May tend to be Aerospace & Defense, Electricity and Food Producers; while the weaker sectors are: General Industrials and Life Insurance.

Article first appeared in Money Observer

Further articles on the market in May.

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