- Across 15 major stock markets, returns from May to October consistently lag the rest of year
- Greatest seasonal difference occurs with FTSE 250 (1.7%) with NASDAQ (0.76%) less significant
30 April 2024 – ‘Sell in May and go away’ is one of the most famous adages in finance, and the saying is well supported by historical data, according to analysis from trading and investing platform eToro.
eToro looked at the monthly price returns for 15 of the world’s largest stock indices, going back an average of 50 years to test whether stocks truly underperform during the period from May to October as the adage implies.
While the monthly average price return across all 15 markets from November to April is 1.2%, with no negative months, this falls to just 0.1% from May to October, with three months averaging negative returns. This seasonality difference is seen individually across all 15 markets examined, with not a single market experiencing strong returns over the summer.
Ben Laidler, Global Markets Strategist at eToro, explained: “Looking back at the numbers provides insight into why the ‘sell in May’ adage has endured for so many years. Even though some reckon it’s a self-fulfilling prophecy, there are multiple factors contributing to this seasonal trend.
“Firstly, there is often positive company guidance on the full year outlook seen in Q1, boosting share prices. We also see a lot of investors reposition portfolios in Q4 in preparation for the upcoming year and the well-established January price effect. Summer months lack these positive influences, alongside generally lower trading volumes. This seasonality is even seen in Australia, reflecting the increasing globalisation of equity markets.”
The greatest price seasonality occurs in assets and markets with higher beta, meaning they are more volatile than the broader global market. The Italian FTSE MIB and the mid-cap index UK FTSE 250 experienced some of the highest average seasonal return differences with 1.8% and 1.7%, respectively.
In contrast, some major US indexes, whose price swings are generally less extreme than the global average, have experienced smaller seasonal return differences, such as the S&P 500 (0.78%), the NASDAQ (0.76%) and the Wilshire small-cap index (0.96%).
This year the annual seasonality trend may have arrived early, according to Ben Laidler: “After a six-month period of remarkable strength, the US stock market has experienced a notable recent downturn, fundamentally driven by delayed US interest rate cut expectations. But with investors also well aware that weaker ‘Sell in May and go away’ seasonality is just around the corner. We see this all as a needed pause for breath in the early innings of a new bull market.”
Table 1: Shows average monthly price return across 15 indices going back an average of 50 years
| Index | Average monthly return in May – October | Average monthly return in November – April | Difference |
| ITALY FTSE MIB | -0.71% | 1.08% | 1.80% |
| FRANCE CAC-40 | -0.24% | 1.54% | 1.78% |
| UK FTSE 250 | -0.14% | 1.56% | 1.70% |
| HONG KONG HSENG | -0.15% | 1.43% | 1.58% |
| JAPAN NIKKEI 225 | -0.19% | 1.25% | 1.44% |
| SPAIN IBEX | -0.13% | 1.14% | 1.27% |
| GERMAN DAX | 0.05% | 1.22% | 1.16% |
| UK FTSE 100 | -0.04% | 1.09% | 1.14% |
| CANADA TSX | 0.07% | 1.14% | 1.07% |
| US WILSHIRE SMALL CAP | 0.37% | 1.33% | 0.96% |
| AUSTRALIA ASX200 | 0.06% | 0.89% | 0.83% |
| US S&P 500 | 0.27% | 1.05% | 0.78% |
| US NASDAQ COMPOSITE | 0.68% | 1.44% | 0.76% |
| SWISS SMI | 0.26% | 0.91% | 0.65% |
| KOREA KOSPI | 0.26% | 0.91% | 0.65% |
| Average | 0.09% | 1.20% | 1.11% |
| Source: Refinitiv | |||
*Past performance is not an indication of future results.
*ENDS*
Notes to editors
About this data
Calculated using Refinitv price data for 15 of the world’s largest stock indices as far back as available until the end of 2022: S&P 500 (data since 1964), NASDAQ (since 1980), Wilshire small caps (1991), TSX (1950), FTSE 100 (1984), FTSE 250 (1986), DAX (1965), CAC (1970), SMI (1998), FTSE MIB (1998), IBEX (1970), Hang Seng (1965), Nikkei 225 (1970), KOSPI (1975), ASX (1992). Average is a simple weight of all 15.
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