S&P 500 Posts Strongest May Since 2020, Defying ‘Sell in May’
The S&P 500 index just recorded its strongest May performance since 2020, prompting questions about a potential summer rally as the market defies the “sell in May and go away” adage.
“Momentum leads price, and a strong May increases the odds of a decent summer rally,” Ed Clissold, chief strategist at Ned Davis Research, told MarketWatch. While macroeconomic factors like inflation, jobs data, and Federal Reserve remarks will influence market returns, Clissold emphasized that the market’s current inertia suggests a bullish trend.
This rally aligns with patterns often seen in presidential election years. The S&P 500 rose 4.8% in May, its best since a 5.3% increase in 2009. Historically, May averages a 0.1% decline, according to Dow Jones Market Data, making it the second worst-performing month.
Since 1950, the S&P 500 has risen 77.8% of the time from April 30 to October 31 in election years, with a median gain of 3.3% during this period, the second highest in the election cycle. However, Clissold warns that a close-fought election could dampen the market, citing past elections where clear outcomes led to better market performance.
Despite the complexities of the 2024 election, with Trump being the first former president convicted of a felony and facing a potential rematch with Biden, the “sell in May” strategy has struggled in recent years. Since 2012, the S&P 500 has risen 10 out of 12 times in May by a median of 3%. However, it’s still too early to determine if this year’s trend will continue, as noted by Steve Sosnick, chief strategist at Interactive Brokers.
“We won’t, or can’t, know if ‘Sell in May’ worked until June at the earliest,” Sosnick wrote.
