Sell in May – Early Summer Update

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Here’s a very brief update on this year’s ‘Sell in May’ effect. The graph above shows that during last winter period (November – April) stocks yielded healthy returns. Especially in Europe and Japan stock prices shot up quite aggressively realizing returns of 17 and even 20%. That’s way above the historical average return during the winter months. For the US, things look less impressive, as stocks realized a return of ‘just’ 4.4%. This is actually below the historical average, as is shown in the graph below.

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Since the start of the lesser half of the year, May – October, things have changed quite dramatically. US and European markets are down. For the latter, the loss is quite significant. The Euro Stoxx 50 index has plunged more than 5% since the start of May. The exception is Japan where the Nikkei is up 2.4% over the same period of time. While that may not sound all that exciting, it’s quite different from history. As the graph below shows the Sell in May effect is especially profound in Japan where, on average, stocks go down during the summer months.

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In fact, historically, all summer months (May – October) have generated a negative return on the Nikkei index. But, it’s still early days, of course. Summer has just begun. For more ‘Sell in May’, please follow this link.

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