The Summer Effect

Interesting Statistics re: the summer effect courtesy of Briefing.com

Two years ago, our May 17, 2004 Big Picture column discussed the fact that the stock market has performed poorly during the May-November period over the past 50 years. It noted that :

"According to the Trader's Almanac, $10,000 invested for the six months of November through April, but then switched out of stocks and into fixed income securities for the May through October period, would have grown to $461,774 through 2002...A similar $10,000 invested in stocks for the May through October period, but moved into fixed income for the other months, actually produced a decline in total assets. The 53-year investment strategy would leave a portfolio of only $8,837."

The total gain in the stock market over the past half has come from the November-May period. The old saying, "sell in May and go away" is based on hard data.

That has not changed over the past few years. In 2004 the market was flat from May through late October. Last year, the market was up slightly over that period.

We expect this pattern to hold again this year.