'Sell in May and go away?' This year the calendar 'trick' overlaps with a Biden-Trump rematch.

By Joy Wiltermuth

The 'winter months' have been especially good to investors in stocks. Is it time to sell?

An exceptionally strong patch of "winter" months in the stock market may make it harder to argue against taking some profit, especially before the traditionally weaker "summer" months arrive.

But the old Wall Street adage telling investors to "sell in May and go away" for six months until late October probably shouldn't weigh heavily in any financial decision-making.

"It's a cute little saying, but with not a lot of substance behind it," said Mike Reynolds, vice president of investment strategy at Glenmede, in a telephone interview. "If it sounds too good to be true, it probably is."

The S&P 500 index SPX is up about 22% since late October, on pace for its best six months of "winter" since November 2020 to April 2021 when it gained 27.9%, according to Dow Jones Market Data.

Those favoring a "go away" strategy, might note that the index has averaged a gain of 5.2% from November to April since 1928, while seeing a smaller 2.1% boost in the six "summer" months from May to October, according to Dow Jones Market Data.

The average return from November to April since 1950 was 7%, and it was higher for those months in the past five, 10 and 20 years when compared with May to October, according to Dow Jones Market Data.

Still, this year continues to see the dominance of the "Magnificent Seven" technology stocks, which have helped propel the S&P 500 to record highs, albeit with some wobbling on the back of recent earnings. Shares of Microsoft Corp., (MSFT) and Meta Platforms Inc. (META) are lower so far in April, but those of Google-parent Alphabet Inc. (GOOG) (GOOGL) and Tesla Inc. (TSLA) are higher.

Amazon.com Inc. (AMZN) has its first-quarter earnings set for Tuesday after the bell, followed by Apple Inc. (AAPL) on Thursday, while Nvidia Corp (NVDA) reports results later in May.

"Investors may be taking a harder look at what some of the other opportunities are" in the S&P 500's remaining 493 stocks, beyond the mega-cap tech "darlings," said Reynolds at Glenmede.

Yet Reynolds also thinks any rotation away from "Magnificent Seven" stocks would be linked to valuations that have been "looking sort of extended," rather than a "simple calendar trick" of investors choosing to get out of stocks ahead of the summer.

Larry Tentarelli, chief technical strategist at the Blue Chip Daily Trend Report, cautioned against selling ahead of the summer months, especially since stocks tend to outperform in presidential election years, as President Joe Biden and former President Donald Trump are likely in for a bitter rematch.

For the trend watchers, Dow Jones Market Data pegged the average gain from May to October in years when there was a presidential election at 4%, looking back to 1928.

"Currently, the S&P 500 index is 5.64% off recent all-time highs and the Nasdaq-100 index is 7.72% off recent record highs," Tentarelli said.

"We believe that this current pullback will be the pause that refreshes for another leg higher and eventual new highs in 2024."

Read: Do you avoid the stock market's worst six months or hold on?

-Joy Wiltermuth

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04-30-24 0730ET

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