Does this rule actually work? To find out whether it does, we have reviewed the stock market's performance during the summer period from May to October and compared it to the performance during the winter period from November to April. For the calculation we have used the benchmark stock indexes of the 11 markets with the largest market capitalization (Canada, China, France, Germany, Hong Kong, India, Japan, Korea, Taiwan, UK, US) from 1970 onward or from the earliest date for which prices are available.
The chart below shows the average returns generated by these markets during the summer and winter periods.
Global stock market returns during summer vs. winter periods
Almost the entire return was generated in the winter period
As you can see, the average return of all 11 markets combined stood at 8.07 percentage points during the winter period, whereas the summer period managed to crank out a mere 0.26% gain!
The result is quite clear: selling in May has paid off.
Seasonality can be examined in greater detail
As an aside, the summer period underperformed the winter period in all 11 countries under review.
Taiwan was leading the pack, with the difference between the two periods actually reaching 17.41 percentage points!
But what were the specific results in other countries? And which patterns apply to individual stocks and commodities? And was early May really the best point in time to sell, or was it perhaps June 07?
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