Sell in May isn’t working

S&P 500, US 10Y note, US 30Y bond, daily, May 1st to August 28th, 2012

I’ve previously written about the old Wall Street adage “sell in May and go away but don’t buy back before St. Legers Day”, the second Saturday of September when a horse race is run in England. For the last two summers this advice proved sound, as the S&P 500 declined -5.56% (2010) and -14.77% (2011) respectively, but what about 2012? The chart above shows the performance of the S&P 500 ($SPX, green area curve), daily, from May1st to August 28th, compared with the US ten year note ($UST, red line) and the US thirty year bond ($USB, black line). Clearly the S&P 500 has flatlined, and in fact has returned a meagre 0.81% over the period, while the US ten year has returned 1.25% and the US thirty year bond returned 3.96%. So what happened? As the chart below shows it seems the S&P 500 peaked out in April, and hasn’t done much since. I’m pretty negative about complacency in the equity markets from this point on, and some people argue that “sell in May” as an investment strategy is done. Barron’s says the big hedge funds have lagged the broader market so far this year so overall this is one strange market.

S&P 500, daily, January 1st to August 28th, 2012

S&P 500, daily, January 1st to August 28th, 2012

Comments are closed.