Sell in May: Major stock market summer returns revealed

Should you sell in May? The returns over summer for all the world’s major stock markets revealed

  • ‘Sell in May and go away’ is one of the most famous adages in finance
  • It is well supported by analysis of the world’s major indices over 50 years 

‘Sell in May and go away’ is one of the most famous sayings in the investment world and new data shows it might have some truth to it.

The phrase harks back to the days when the City essentially closed for the summer and wouldn’t come back until St Leger Day in September – a date that refers to a horse race rather than a saint’s day.

Followers of the investing theory believe the summer months are more prone to market upset, although in recent years commentators have expressed some scepticism.

‘Sell in May, and go away’ encourages investors to sell their holdings at the start of summer and leave their portfolios untouched until September

However, analysis by eToro reveals there might still be some truth to it. 

The monthly average share price return between November and April of 15 of the world’s largest indices is 1.2 per cent over 50 years.

By contrast, there was just a 0.09 per cent average monthly return in the months between May and October, according to eToro’s analysis.

December often has higher than average returns, in a phenomenon nicknamed the Santa Rally. 

While there is a seasonal difference in all 15 markets, domestic equities seem to have more volatile summer months than global equities.

The FTSE 100 has delivered a 1.09 per cent average monthly return from November to April, whereas it has recorded a -0.04 per cent average monthly return over summer.

The FTSE 250, which is more closely tied to the UK’s economy, has similarly recorded an average 1.56 per cent monthly return between November and April, but a negative return of 0.14 per cent in the summer months.

The Italian and French indices have also seen significant price seasonality. Italy’s FTSE MIB has enjoyed a monthly return of 1.08 per cent in the colder months, but this slips to -0.71 per cent over the summer. 

France’s Cac-40 has returned -0.24 per cent over the summer, while recording a 1.54 per cent monthly average in the winter. 

The Nasdaq by contrast has returned an average 1.44 per cent in the winter and 0.68 per cent in the summer, while the S&P 500 has recorded a 1.05 per cent return between November and April and a 0.27 per cent between May and October.

Korea’s Kospi and Australia’s ASX200 have also seen smaller differences between the seasons.  

Average monthly return across stock markets going back 50 years 
Index Average monthly return in May-October Average monthly return in November-April   Difference 
US S&P 500  0.27%  1.05% 0.78%
US Nasdaq  Composite   0.68%  1.44% 0.76%
US Wilshire Small Cap   0.37%  1.33%  0.96% 
Canada TSX   0.07%  1.14%  1.07%
UK FTSE 100  -0.04%  1.09%  1.14% 
UK FTSE 250   -0.14%  1.56%  1.70% 
German Dax    0.05%  1.22%  1.16% 
France Cac-40  -0.24%  1.54%  1.78% 
Swiss SMI  0.26%  0.91%  0.65% 
Italy FTSE MIB  -0.71%  1.08%  1.80% 
Spain IBEX  -0.13% 1.14%  1.27% 
Hong Kong HSENG  -0.15%  1.43%  1.58% 
Japan Nikkei 225  -0.19%  1.25%  1.44% 
Korea KOSPI   0.26%  0.91%  0.65% 
Australia ASX200  0.06%  0.89%  0.83% 
Average   0.09%  1.20%  1.11% 
Source: eToro using Refinitiv price data

Selling in May might be tempting to investors who want to lock in some of the bounce back after the end of 2022. 

But trying to time the market is notoriously difficult and most experts recommend investors stay the course, hoping to benefit from time in the market. 

‘The historic data shows us just why the ‘sell in May’ adage’ has endured for so many years. While some may think it’s now a self-fulfilling prophecy, there are several key drivers of this seasonal trend,’ says Ben Laidler, eToro’s global markets strategist.

‘Firstly we have Q4’s typical investor repositioning for the year-ahead and in advance of the well-known January price effect. Then Q1’s usually positive company guidance on the full year outlook, which can improve investor sentiment. While the summer months then suffer from the lack of these positive drivers, alongside typically lower trading volumes.

‘We should remember though that history doesn’t always repeat itself and that we’re living an extraordinary period in financial markets. With interest rate hikes almost over and a lot of the major economies still avoiding a recession, 2023 has the potential to buck the ‘sell in May’ trend.’