Many investors have heard the term "Sell in May and Go Away" but have little information to make the decision if this is a good investing strategy.
Recently while reviewing blogs online there was a post saying to "Buy Utilities in May using XLU" as a way to invest with the "Sell In May" theme in mind. BUT is XLU a good way to go when looking at Historical Data?
Let's review some seasonal return charts and see what history has to say on the matter of Sell in May and Go Away.
First up on the list are Bonds. If Sell In May applies to stocks, does it apply to bonds as well? The seasonal chart below is for the BND ETF. Based on 8 years of data Bonds are basically flat in May and do not return to profit until July.
Now let's take a look at Stocks in May. Using the DIA ETF based on 15 years of data Stocks are down on average in May and for the most part (on a historical basis) stocks return flat to negative until October.
We see that Stocks and Bonds are typically down in May. What about the idea of running to utility stocks for safety and return. When the market goes down you can be sure Utilities will go down as well. Here XLU returns on average a 1/4% in May based on 15 years of data. Positive returns happen about 65% of the time.
You may think well GOLD must be the place to be in May? Sorry to disappoint. Gold has the worst performance vs. Stocks or Bonds in May. This is based on 11 years of data using the GLD ETF.
So what is an investor to do? You can look at asset allocation strategies such as on Investment Foresight
, or maybe take a break, enjoy the summer and stay in cash.
Of course if you look at any charts there are times the market rallies in May, and times it does not. What we have posted here are historical charts that can be used as a guide when making investment decisions.