“Sell in May and Go Away” seems to be fresh on investor’s
minds going into May 2013. Who can blame
us? The last 3 years the month of May
has indeed been a pretty good month to avoid if you were lucky enough to do
so. The market and specifically the
S&P 500 TR, has not always been a bad place to be in May. In fact, after removing the high and low
returns for statistical analysis, the S&P 500 TR has achieved an average
return of 1.33% for the month of May over the last twenty-five years. It is clearly a choppy month and tough to get
a read on historical sector trends.
When examining the trailing 25, 20, 15 and 10 year periods,
energy stocks, natural resources and consumer staples have shown the most
consistency. Each of these sectors have
maintained a positive mean return and finished as top half performers versus
the rest of the sectors and the S&P 500 TR over these periods of time. However, over the last three years “Sell in
May” has occurred and we have seen an even greater rush to safety with utility
and health care stocks leading the way. This
May will be interesting. Both health
care stocks and utility stocks have been inflated the first four month of
2013. Utilities in particular are
trading (on average) at a higher current PE multiple than the tech sector. I have only seen that happen a few times
throughout my career, and historically this market (not the economy) resembles
the year 1995. If investors have indeed
bought into the “Sell in May” theory, then I would expect the trend over the last
three years to hold up once again. Even
though utility stocks are inflated, I do not see a selloff anytime soon. Many investors have been piling into
utilities as a bond alternative, meaning they are holding them for the income,
and the capital appreciation has been an added bonus. I think this trend is a good sign for the
higher beta sectors such as technology stocks.
Utility and health care stocks have been a perceived conservative way to
get back into the market. As gains
accumulate on paper it increases the appetite for more alpha, and thus those
dollars will eventually lead these investors to other areas considered more
risky. I don’t think this will happen
this May but rather as the year moves forward.
|
May
|
Cons Disc
|
Health Care
|
Energy
|
Financials
|
Cons Staples
|
Technology
|
|
1988
|
-2.39%
|
-0.80%
|
-3.39%
|
0.63%
|
0.75%
|
-3.88%
|
|
1989
|
5.53%
|
3.15%
|
1.93%
|
4.20%
|
6.17%
|
6.94%
|
|
1990
|
10.52%
|
12.23%
|
9.42%
|
6.71%
|
8.71%
|
12.78%
|
|
1991
|
5.96%
|
4.40%
|
1.46%
|
5.22%
|
3.66%
|
3.13%
|
|
1992
|
0.57%
|
3.16%
|
5.67%
|
3.13%
|
0.89%
|
1.16%
|
|
1993
|
6.49%
|
5.07%
|
4.07%
|
-1.03%
|
3.15%
|
8.62%
|
|
1994
|
-2.27%
|
0.56%
|
1.92%
|
4.25%
|
-0.73%
|
-2.02%
|
|
1995
|
1.72%
|
1.16%
|
2.33%
|
5.13%
|
3.59%
|
3.65%
|
|
1996
|
3.82%
|
1.77%
|
1.62%
|
1.99%
|
3.69%
|
3.35%
|
|
1997
|
7.15%
|
10.34%
|
10.42%
|
5.46%
|
3.40%
|
12.43%
|
|
1998
|
0.27%
|
-3.52%
|
-6.36%
|
-2.40%
|
0.69%
|
-6.72%
|
|
1999
|
-2.75%
|
-0.12%
|
-2.59%
|
-3.49%
|
-1.63%
|
-0.98%
|
|
2000
|
-2.44%
|
1.49%
|
11.52%
|
5.50%
|
3.89%
|
-11.58%
|
|
2001
|
3.11%
|
4.22%
|
0.55%
|
4.03%
|
2.57%
|
-4.12%
|
|
2002
|
-0.45%
|
-3.67%
|
-2.72%
|
0.03%
|
0.50%
|
-5.80%
|
|
2003
|
5.87%
|
8.95%
|
12.68%
|
6.18%
|
6.44%
|
12.27%
|
|
2004
|
-0.16%
|
-0.70%
|
-1.09%
|
1.95%
|
-1.08%
|
5.62%
|
|
2005
|
5.71%
|
2.70%
|
3.98%
|
2.62%
|
3.21%
|
9.25%
|
|
2006
|
-3.39%
|
-3.25%
|
-3.87%
|
-3.82%
|
-0.31%
|
-8.17%
|
|
2007
|
3.29%
|
1.30%
|
7.80%
|
2.45%
|
1.53%
|
4.29%
|
|
2008
|
1.18%
|
2.52%
|
7.86%
|
-2.79%
|
1.10%
|
5.85%
|
|
2009
|
0.72%
|
5.67%
|
17.26%
|
10.96%
|
6.41%
|
4.45%
|
|
2010
|
-6.75%
|
-7.79%
|
-12.69%
|
-9.72%
|
-6.91%
|
-7.01%
|
|
2011
|
0.17%
|
2.14%
|
-4.30%
|
-2.85%
|
1.30%
|
-1.56%
|
|
2012
|
-5.70%
|
-3.64%
|
-10.97%
|
-7.53%
|
-4.20%
|
-9.14%
|
|
Mean
|
1.39%
|
1.87%
|
2.08%
|
1.55%
|
1.96%
|
1.37%
|
|
Standard Deviation
|
3.56
|
3.61
|
5.96
|
3.79
|
2.60
|
6.35
|
|
Trailing 5yr Mean
|
-1.60%
|
0.34%
|
-2.47%
|
-4.39%
|
-0.60%
|
-1.37%
|
|
Trailing 10yr Mean
|
0.23%
|
0.84%
|
1.51%
|
-0.47%
|
1.00%
|
1.59%
|
|
Trailing 15 yr Mean
|
-0.03%
|
0.40%
|
0.96%
|
-0.01%
|
1.08%
|
-1.08%
|
|
Trailing 20 Yr Mean
|
0.84%
|
1.26%
|
1.83%
|
0.87%
|
1.50%
|
0.66%
|
|
Telecom
|
Nat Resources
|
Real Estate
|
Utilities
|
Industrials
|
S&P 500 TR
|
|
|
1988
|
1.95%
|
-1.81%
|
-1.08%
|
3.62%
|
-1.61%
|
0.86%
|
|
1989
|
5.91%
|
0.46%
|
1.31%
|
4.42%
|
3.50%
|
4.05%
|
|
1990
|
8.43%
|
7.60%
|
0.88%
|
4.58%
|
6.82%
|
9.75%
|
|
1991
|
0.75%
|
3.07%
|
1.07%
|
0.20%
|
5.72%
|
4.31%
|
|
1992
|
-0.65%
|
3.91%
|
3.21%
|
1.95%
|
-0.22%
|
0.49%
|
|
1993
|
3.30%
|
3.56%
|
-0.69%
|
0.28%
|
4.39%
|
2.68%
|
|
1994
|
-0.22%
|
1.69%
|
1.28%
|
-2.50%
|
-1.88%
|
1.64%
|
|
1995
|
2.49%
|
1.65%
|
4.00%
|
3.74%
|
1.67%
|
4.00%
|
|
1996
|
2.85%
|
1.18%
|
2.55%
|
0.74%
|
1.39%
|
2.58%
|
|
1997
|
9.91%
|
8.02%
|
2.90%
|
4.81%
|
7.88%
|
6.09%
|
|
1998
|
-4.39%
|
-7.48%
|
-1.15%
|
-1.36%
|
-2.93%
|
-1.72%
|
|
1999
|
-0.53%
|
-3.90%
|
2.28%
|
2.51%
|
-1.42%
|
-2.36%
|
|
2000
|
-8.97%
|
7.99%
|
1.19%
|
-1.06%
|
-3.64%
|
-2.05%
|
|
2001
|
-4.96%
|
0.86%
|
2.02%
|
-1.84%
|
3.64%
|
0.67%
|
|
2002
|
-1.52%
|
0.27%
|
1.42%
|
-3.46%
|
-0.67%
|
-0.74%
|
|
2003
|
9.52%
|
10.56%
|
5.54%
|
0.30%
|
4.22%
|
5.27%
|
|
2004
|
0.73%
|
0.66%
|
6.34%
|
1.72%
|
2.08%
|
1.37%
|
|
2005
|
5.42%
|
2.48%
|
3.15%
|
0.73%
|
4.86%
|
3.18%
|
|
2006
|
-6.81%
|
-3.39%
|
-2.81%
|
-0.16%
|
-2.91%
|
-2.88%
|
|
2007
|
7.14%
|
5.97%
|
0.59%
|
3.41%
|
5.77%
|
3.49%
|
|
2008
|
5.24%
|
6.98%
|
0.08%
|
3.67%
|
2.30%
|
1.30%
|
|
2009
|
7.87%
|
15.98%
|
3.06%
|
6.13%
|
4.25%
|
5.59%
|
|
2010
|
-5.47%
|
-10.68%
|
-5.25%
|
-6.69%
|
-8.40%
|
-7.99%
|
|
2011
|
-0.17%
|
-4.16%
|
1.36%
|
0.30%
|
-2.56%
|
-1.13%
|
|
2012
|
-6.55%
|
-12.13%
|
-4.30%
|
-2.82%
|
-6.53%
|
-6.01%
|
|
Mean
|
1.32%
|
1.54%
|
1.21%
|
1.03%
|
1.14%
|
1.33%
|
|
Standard Deviation
|
4.77
|
5.09
|
2.16
|
2.45
|
3.55
|
3.01
|
|
Trailing 5yr Mean
|
-0.13%
|
-2.62%
|
-0.95%
|
0.38%
|
-2.26%
|
-1.95%
|
|
Trailing 10yr Mean
|
1.78%
|
1.05%
|
0.83%
|
0.89%
|
0.71%
|
0.57%
|
|
Trailing 15 yr Mean
|
-0.31%
|
0.47%
|
0.96%
|
0.15%
|
0.05%
|
-0.12%
|
|
Trailing 20 Yr Mean
|
0.77%
|
1.24%
|
1.25%
|
0.50%
|
0.67%
|
0.83%
|
|
25 Year
|
20 Year
|
15 Year
|
10 Year
|
5 Year
|
|
|
1
|
Energy
|
Energy
|
Cons Staples
|
Telecom
|
Utilities
|
|
2
|
Cons Staples
|
Cons Staples
|
Energy
|
Technology
|
Health Care
|
|
3
|
Health Care
|
Health Care
|
Real Estate
|
Energy
|
Telecom
|
|
4
|
Financials
|
Real Estate
|
Nat Resources
|
Nat Resources
|
Cons Staples
|
|
5
|
Nat Resources
|
Nat Resources
|
Health Care
|
Cons Staples
|
Real Estate
|
|
6
|
Cons Disc
|
Financials
|
Utilities
|
Utilities
|
Technology
|
|
7
|
Technology
|
Cons Disc
|
Industrials
|
Health
Care
|
Cons Disc
|
|
8
|
S&P 500 TR
|
S&P 500 TR
|
Financials
|
Real
Estate
|
S&P 500 TR
|
|
9
|
Telecom
|
Telecom
|
Cons Disc
|
Industrials
|
Industrials
|
|
10
|
Real
Estate
|
Industrials
|
S&P 500 TR
|
S&P
500 TR
|
Energy
|
|
11
|
Industrials
|
Technology
|
Telecom
|
Cons
Disc
|
Nat Resources
|
|
12
|
Utilities
|
Utilities
|
Technology
|
Financials
|
Financials
|
Jon R. Orcutt is the founder of Allocation For Life, Author of The Allocation For Life Investment Newsletter, Author of "Master The Markets With Mutual Funds: A Common Sense Guide To Investing Success" and manager/creator of the AFL Models available to Allocation For Life subscribers at Folio Investing.
