Market Seasonality Study, "Sell in May & Go Away"

Almost everyone has heard the saying, 'Sell In May and Go Away' before, however you may not realize how powerful this is until you actually see the hard data/statistics.
The table below is of the Dow Jones going back to 1950 and is divided into three columns with an initial investment of $10,000: The column on the right shows how the $10,000 grew over time via just simple buy and hold, while the other two columns split this $10,000 investment into two 6 month time frames of the year.  The left hand column shows what would happen if you invested $10,000 in the Dow Jones from 1950 to present ONLY during the May1 - Oct 31 six month time frame every year, while the middle column shows the results if you invested the $10,000 into the Dow Jones in the other 6 months of the year every year from Nov 1 - April 30th.
The results are quite astonishing: If one invested $10,000 into the Dow Jones ONLY from May 1st - Oct 31st and starting from 1950 to present, you actually LOST money over 62 years, & just went positive in 2012!! Now putting this into contrast, if you had invested the $10,000 into the other 6 month time frame (Nov 1 - Apr 30th), that $10,000 turned into $935K!  Quite a difference. Lastly, if you simply invested your money into the Dow Jones from 1950 -  present using buy & hold, your $10,000 grew into $726K (minus dividends of course), which is less than if you had your money invested in the Dow from Nov 1 - Apr 30th on 6 months of the year!

What this table and statistics show you is that historically the market has made the majority of its gains in one 6 month time frame of the year (Nov 1 - April 30th). Market seasonality is real & the data backs it up.

$10000 starting investment for each 6 month time frame
	May1-Oct31		Nov1-Apr 30			Simple Buy & Hold
Year	%gain/loss	$10,000	%gain/loss	$10,000		%gain/loss	$10,000
1950	5	$10,500	15.2	$11,520		17.6	$11,760
1951	1.2	$10,626	-1.8	$11,131		14.4	$13,453
1952	4.5	$11,104	2.1	$11,550		8.4	$14,584
1953	0.4	$11,149	15.8	$13,375		-3.8	$14,029
1954	10.3	$12,297	20.9	$16,171		44	$20,202
1955	6.9	$13,145	13.5	$18,354		20.8	$24,404
1956	-7.0	$12,225	3	$18,904		2.3	$24,966
1957	-10.8	$10,905	3.4	$19,547		-12.8	$21,770
1958	19.2	$12,999	14.8	$22,440		34	$29,172
1959	3.7	$13,480	-6.9	$20,892		16.4	$33,956
1960	-3.5	$13,008	16.9	$24,422		-9.3	$30,798
1961	3.7	$13,489	-5.5	$23,079		18.7	$36,557
1962	-11.4	$11,951	21.7	$28,087		-10.8	$32,609
1963	5.2	$12,573	7.4	$30,166		17	$38,153
1964	7.7	$13,541	5.6	$31,855		14.6	$43,723
1965	4.2	$14,110	-2.8	$30,963		10.9	$48,489
1966	-13.6	$12,191	11.1	$34,400		-18.9	$39,324
1967	-1.9	$11,959	3.7	$35,673		15.2	$45,302
1968	4.4	$12,485	-0.2	$35,601		4.3	$47,250
1969	-9.9	$11,249	-14	$30,617		-15.2	$40,068
1970	2.7	$11,553	24.6	$38,149		4.8	$41,991
1971	-10.9	$10,294	13.7	$43,375		6.1	$44,552
1972	0.1	$10,304	-3.6	$41,814		14.6	$51,057
1973	3.8	$10,696	-12.5	$36,587		-16.6	$42,582
1974	-20.5	$8,503	23.4	$45,148		-27.6	$30,829
1975	1.8	$8,656	19.2	$53,817		38.3	$42,637
1976	-3.2	$8,379	-3.9	$51,718		17.9	$50,269
1977	-11.7	$7,399	2.3	$52,907		-17.3	$41,572
1978	-5.4	$6,999	7.9	$57,087		-3.1	$40,283
1979	-4.6	$6,677	0.2	$57,201		4.2	$41,975
1980	13.1	$7,552	7.9	$61,720		14.9	$48,230
1981	-14.6	$6,449	-0.5	$61,412		-9.2	$43,793
1982	16.9	$7,539	23.6	$75,905		19.6	$52,376
1983	-0.1	$7,532	-4.4	$72,565		20.3	$63,008
1984	3.1	$7,765	4.2	$75,613		-3.7	$60,677
1985	9.2	$8,480	29.8	$98,145		27.7	$77,484
1986	5.3	$8,929	21.8	$119,541		22.6	$94,996
1987	-12.8	$7,786	1.9	$121,812		2.3	$97,181
1988	5.7	$8,230	12.6	$137,161		11.8	$108,648
1989	9.4	$9,004	0.4	$137,709		27	$137,983
1990	-8.1	$8,274	18.2	$162,772		-4.3	$132,050
1991	6.3	$8,796	9.4	$178,073		20.3	$158,856
1992	-4.0	$8,444	6.2	$189,113		4.2	$165,528
1993	7.4	$9,069	0	$189,170		13.7	$188,205
1994	6.2	$9,631	10.6	$209,222		2.1	$192,157
1995	10.0	$10,594	17.1	$244,999		33.5	$256,530
1996	8.3	$11,473	16.2	$346,751		26	$323,228
1997	6.2	$12,184	21.8	$346,751		22.6	$396,278
1998	-5.2	$11,551	25.6	$435,520		16.1	$460,078
1999	-0.5	$11,493	0	$435,694		25.2	$576,018
2000	2.2	$11,746	-2.2	$426,109		-6.2	$540,305
2001	-15.5	$9,925	9.6	$467,015		-7.1	$501,943
2002	-15.6	$8,377	1	$471,685		-16.8	$417,617
2003	15.6	$9,684	4.3	$491,968		25.3	$523,274
2004	-1.9	$9,500	1.6	$499,839		3.1	$539,495
2005	2.4	$9,728	8.9	$544,325		-0.6	$536,258
2006	6.3	$10,341	8.9	$592,770		16.3	$623,669
2007	6.6	$11,027	-7.9	$545,770		6.5	$663,977
2008	-27.3	$8,022	-12.4	$478,002		-33.8	$439,406
2009	18.9	$9,540	13.3	$541,811		18.9	$522,343
2010	1.0	$9,634	15.2	$624,164		11	$579,773
2011	-0.3	$9,605	15.1	$718,600		5.5	$611,851
2012	1.6	$9,759	13.9	$818,518		10.4	$675,700
2013	4.6	$10,208	7.6	$880,443		7.5	$726,543
2014	1.9	$10,402	6.2	$935,030
64 Year loss/gain		$402		$935,030			$726,543

To dig a little deeper, let’s take a look at major market tops & bottoms in the S&P 500 since 1950, and see if in fact the market seasonality effects hold true, & just how big & bad is the month of October?

Major Market Tops & Bottoms in the S&P since 1950 (Drawdowns of 20% or more for the bottoms):

Its interesting to note that October has by far the most major market bottoms, 5 of 10 in the chart above. But for market tops, October only has one since 1950, the high back in 2007 before the financial crisis. 

As far as monthly historical performance, here is a chart of monthly returns since 1950, it tells quite a different story. 

Very interesting that for October to be the month of doom, its actually in the middle of the pack as far historical returns, while September is clearly the actually month of doom. As our study of the S&P confirms, you’ll see the monthly returns from Nov-April are far superior to that of May-Oct.

                One last thing to consider is volatility. This is where October’s reputation actually comes from, as its hands down the most volatile month historically (measured by percent change from intra-month lows to intra-month highs). So there you have it, now don’t let me catch you talking bad about October!