Stocks have seen a significant increase in value over the past seasonally favorable period from November 2023 to April 2024, with an average total return of 18.7% for Russell 3000 Index members. However, as the period came to a close, many investors may have been considering whether to heed the Wall Street saying “Sell in May and Go Away.”
Despite the popular adage, historical market data spanning nearly a century suggests that selling stocks based on the calendar can be detrimental to overall investor wealth. Value Stocks have historically shown positive absolute and relative returns during the seasonally less favorable May-to-October periods, indicating that maintaining a long-term asset allocation strategy may be the best course of action.
The idea that time in the market trumps market timing is further supported by the 2023 Quantitative Analysis of Investor Behavior report from DALBAR, which indicates that individual investors who attempt to time the market often fare poorly. Both fixed income and equity mutual fund investors have shown subpar performance, with many missing out on potential gains by making emotional investment decisions.
Recent market trends have also favored staying invested, with stocks seeing gains for five consecutive days and capping off the second straight week of positive growth. This recent upswing comes after the American Association of Individual Investors (AAII) weekly Investor Sentiment Survey indicated more pessimists than optimists, suggesting that staying the course despite market fluctuations may be the best strategy in the long run.
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