May’s mixed messages

  • May has usually been a positive month for stocks
  • Typical return has been relatively modest, though
  • April losses sometimes preceded May weakness

While the time-worn “Sell in May and go away” investing meme has probably tainted the month’s reputation for some investors, it doesn’t have much of a basis in reality—at least in terms of how often stocks have moved higher or lower for the month. After that, the story gets a little murkier.

May was a positive month for the S&P 500 (SPX) in 42 of the past 67 years, or 63% of the time—only four other months had a better win rate since 1957. And since 1990, May was an up month 73% of the time, second only to April and December, which were tied at 76.5%:

Chart 1: S&P 500 May returns, 1957-2023.

Source (data): Power E*TRADE (For illustration purposes. Not a recommendation. Note: It is not possible to invest directly in an index.)

As is the case with April, though, May’s returns have tended to be relatively modest—its 1.2% median return since 1990 was smaller than all but four other months. Also, as the chart shows, since 1957, the average negative May return was larger than the average positive May return.1 Since 1990, only five Aprils have had returns of 4% or more. Only June and August have had fewer 4%-or-larger returns during that span.

One twist related to the market’s recent performance: Weaker-than-average Aprils have more often than not been followed by weaker-than-average Mays. Since 1957, the S&P 500’s median May return after positive Aprils was 1.2%. Following negative April returns, though, the median May return was -0.1%, and after the seven other times the April loss was -3% or more, May’s median return was -2.2%. Last month was the SPX’s second-biggest April decline since 2002.

Also, the market has sometimes followed an up-and-down path during May. The intramonth profile below shows the SPX’s median return throughout May since 1957, measured from the last trading day of April to each of the next 22 trading days:2

Chart 2: S&P 500 May intramonth return profile, 1957-2023.

Source: Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation. Note: It is not possible to invest directly in an index.) *Depending on the year, trading day 22 may be the first trading of June rather than the final trading day of May.

As the chart shows, the SPX’s “typical” path included a decline toward the middle of month—since 1957, in fact, the SPX was in negative territory for the month at day 12 in 34 of 67 years (although only 16 of the past 34). But from that point, the market tended to be more bullish for the remainder of the month.

Market Mover Update: With earnings due out Thursday, Monster Beverage (MNST) closed Tuesday a little lower than it did last Wednesday, but up more than 3% from the nearly six-month low it hit last Thursday. Open interest in the May $55 calls was still above 7,000 (see “Pre-earnings fizz”).

June gold futures (GCM4) fell more than 2%, trading as low as $2,302.10 intraday and closing at their lowest level since early April.

Today’s numbers include (all times ET): mortgage applications (7 a.m.), ADP Employment Change Report (8:30 a.m.), S&P Global Manufacturing (9:45 a.m.), ISM Manufacturing Index (10 a.m.), Construction Spending (10 a.m.), Job Openings and Labor Turnover Survey (10 a.m.), EIA Petroleum Status Report (10:30 a.m.), Fed interest rate announcement (2 p.m.).

Today’s earnings include: Automatic Data Processing (ADP), Estee Lauder (EL), Barrick Gold (GOLD), Kraft Heinz (KHC), Mastercard (MA), Pfizer (PFE), Yum Brands (YUM), Carvana (CVNA), eBay (EBAY), Etsy (ETSY), First Solar (FSLR), Paycom (PAYC), Qualcomm (QCOM).


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1 All figures reflect S&P 500 (SPX) monthly or daily closing prices, 1957-2023.
2 Note: Depending on the year, trading day 22 represents the first trading of June rather than the final trading day of May. Supporting document available upon request.

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