By Irene Aldridge
For many investors “Sell in May and Go Away” was the mantra to relax for the summer with trading history defending this as the best way to protect your portfolio. While the exact origin of the expression is unknown, it was most likely developed during the stock market boom of the 1920s, back when investors literally went away for the summer. Many sold their portfolio holdings in May, and activity on Wall Street dropped to a bare minimum until September.
Today, the expression remains valid, but mostly for August. According to quantitative analysis, June and July are full of investing opportunities, while August tends to be a sluggish, uneventful month. For instance, in June, General Electric (NYSE Symbol: GE) tends to consistently outperform other utilities, delivering on average four percent per June in excess of the utilities ETF (NYSE symbol: XLU) with 95 percent statistical confidence. Also in June, the S&P 500, financial sector and consumer discretionary securities tend to return over two percent, four percent, six percent, respectively, above crude oil and related companies like Exxon Mobile (NYSE symbol: XOM). In June, the consumer discretionary sector also outperforms technology companies like technology giant Google (NYSE symbol: GOOG), Dell (NYSE symbol: DELL) and Hewlett Packard (NYSE symbol: HPQ).
Similarly, July is a great month for investors seeking to diversify their Consumer Staples-heavy portfolio. In July, Google, real estate investment trust Macerich Co., retailer Gap, Inc. (NYSE symbol: GPS), and Chicago Mercantile Exchange (NYSE symbol: CME) all outperform consumer staples index. CME in July also significantly outperforms financial sector.
In August, however, markets really slow down with little statistically meaningful activity across the sectors. Selling in July and go away for August may now be a more suitable slogan.