Strategists Say Hold: Stocks May Beat the 'Sell in May' Trend

Key Points

• Current market conditions and influential policy considerations are prompting analysts to anticipate sustained equity strength through the traditionally weaker summer months.
• Investors may discover strategic advantages by focusing on specific sector opportunities and individual company performance rather than adhering to historical seasonal patterns.
• An adaptive investment approach, emphasizing current economic data and corporate fundamentals, is favored for navigating the remainder of 2025.

The well-known market adage "Sell in May and Go Away" advises investors to exit equity markets during a historically underperforming six-month period beginning in May. However, for 2025, many market strategists recommend a more flexible strategy. They argue that current unique market conditions, strong underlying momentum, and important policy factors may alter the typical seasonal pattern. This evolving institutional strategic outlook has important consequences for investors in the months ahead.

Understanding the Market's Seasonal Wisdom

The "Sell in May and Go Away" strategy suggests reducing stock market exposure from May to October due to historically lower average returns compared to the November to April period. For example, historical financial data indicates an average S&P 500 return of 1.8% during May-October since 1950, contrasting with a much stronger approximately 7% performance in the following six months. This has prompted some strategic investors to decrease equity holdings in May and reinvest around the start of autumn as entry points present themselves.

Strategists Bullish Beyond May's Traditional Exit

Market strategists recommend caution against the "Sell in May" strategy for 2025, citing unique factors that could counter typical seasonal declines. They believe central bank actions, government spending, and global politics will be more influential on equity markets than historical patterns. Current market dynamics, such as trade policies and economic shifts, are considered key.

Strong market momentum, positive investor sentiment, and improving corporate performance heading into the end of May could further weaken the "Sell in May" effect. The diminished reliability of simple seasonal rules in volatile or catalyst-driven markets is also noted. Moreover, historical instances gathered from market data since the late 1980s suggest that staying invested has sometimes outperformed a summer exit strategy.

Strategic Plays for the 2025 Summer Market

Given the uncertain relevance of the "Sell in May" strategy for 2025, alternative approaches warrant consideration for the May-October period this year. Instead of adhering to this traditional pattern, market participants could explore different strategic paths.

One option is to maintain investment positions to capitalize on potential gains. If, as some analysts suggest, unique factors are set to support equity markets, selling based on the calendar could result in missing out on continued appreciation in major indices, often tracked by ETFs such as SPDR S&P 500 ETF Trust NYSEARCA: SPY or Invesco QQQ NASDAQ: QQQ.

Alternatively, a more active strategy could involve focusing on sector-specific opportunities. Even if the broader market experiences sideways movement, particular sectors may outperform due to prevailing economic conditions, policy developments, or specific industry catalysts during the summer months of 2025. 

In what is being described as a high volatility news-driven market cycle, a buying-the-dips strategy might prove effective for investors who remain optimistic about the underlying positive trend. Rather than interpreting market pullbacks as sell signals, these periods of weakness could be seen as potential entry/accumulation points, especially if driven by temporary concerns rather than fundamental shifts in the market outlook.

In the current environment, careful selection of quality stocks is also gaining importance. When broad seasonal trends have less influence, the performance of individual companies, driven by their earnings, strategic actions, and competitive landscape, becomes increasingly significant.

Finally, investors should thoroughly evaluate the risk-reward trade-offs associated with seasonal timing strategies. Exiting and re-entering the market involves transaction expenses and potential tax implications. These factors should be carefully considered against the uncertain benefits of avoiding a potentially slight seasonal downturn, particularly if it risks missing out on a more substantial rally. Strategic decisions should remain closely aligned with evolving economic data, corporate earnings reports, and policy changes throughout the May-October period.

Adaptive Investing: Beyond Seasonal Sayings

The "Sell in May and Go Away" adage, while possessing a basis in long-term historical averages, appears to be encountering significant headwinds from prevailing market sentiment and conditions in 2025. The consensus among many market strategists suggests that unique market dynamics, sustained momentum from earlier in the year, and the overarching influence of policy decisions are likely to be more dominant factors shaping equity performance through the summer and early autumn.

While the historical tendency for softer returns in the May-October period should not be entirely dismissed, market participants must weigh this against the current, specific market environment. For 2025, the narrative is leaning towards a market driven more by contemporary catalysts than by calendar-based precedents.

Ultimately, an adaptive and data-driven approach is essential for the remainder of the year. Investors may find that strategic decisions for the May-October 2025 period are better guided by ongoing analysis of economic fundamentals, corporate earnings reports, central bank communications, and evolving geopolitical terrain. Relying solely on historical seasonal tendencies, without accounting for the distinct characteristics of the present market, could lead to missed opportunities or suboptimal positioning. In a dynamic market, an adaptive perspective that values current information over historical dogma is likely more advantageous.