The familiar Wall Street saying "Sell in May and go away" suggests investors should liquidate their stock holdings at the start of May and stay out of the market until around October or November. The idea is to avoid a period of historically weaker returns during the summer months. However, recent data and market analysis are challenging this long-held belief.
In nine of the past 10 years, stocks have actually gained during the May-October stretch. In fact, 2025 saw the strongest "sell in May" cycle on record. This challenges the historical data that shows the S&P 500 has gained an average of about 2% from May through October since 1945. More recently, since 1990, the S&P 500 has lost nearly 2% during this six-month period, falling 56% of the time.
Several factors contribute to the argument against selling in May. Q1 2026 earnings season has been encouraging, with upward revisions to forecasts in 9 of 11 sectors, led by financials, tech, and real estate. The economy and labor market also demonstrate resilience. S&P 500 companies are on track to post a net profit margin of 13.4% for the first quarter, potentially the highest on record. Consensus expectations anticipate this number rising for the next quarter.
While geopolitical events and other factors can influence short-term market movements, strong earnings continue to be a primary driver of stock prices. The data suggest that investors should carefully consider the current market conditions and avoid blindly following the "Sell in May" cliché. A more nuanced approach, considering sector rotation or holding onto positions for the long haul, may be more beneficial.
