Understanding the ‘Sell in May and Go Away’ Strategy in Today’s Market

The Wisdom Behind “Sell in May and Go Away”

The saying, “Sell in May and go away,” has long been a staple in the lexicon of stock market wisdom. I first encountered this phrase during my childhood, when my father, a savvy New York businessman, shared it with me on a sweltering afternoon decades ago. As we navigated the bustling city streets in our un-air-conditioned Ford sedan, he remarked, “The brokers and the affluent investors have already retreated to the Hamptons for the summer.”

He continued, his voice rising above the cacophony of traffic, “They essentially take a break from the market until after Labor Day. For those of us still grinding away, it’s prudent to accept that there’s little action to be had in the markets.” In an election year, he argued, this notion becomes even more pronounced. The general public, he believed, rarely pays close attention to political developments until the summer haze lifts.

However, this summer, ignoring both the political landscape and the financial markets is hardly a viable option. If you’ve been paying attention, you know that the political arena has been nothing short of enthralling. Moreover, due to the political climate, various sectors and fixed-income instruments have experienced notable fluctuations.

“The Trump trade” is a term currently circulating among financial analysts, referring to investment strategies that fluctuate alongside the fortunes of the former president. Wall Street experts have linked these market movements to the prices of stocks in industries such as firearms, corrections, and fossil fuels. Additionally, the Trump trade has been associated with minor shifts in bond yields, as well as changes in transactional expectations, including mergers and acquisitions and even fluctuations in the dollar’s exchange rate.

Should the vice president’s approval ratings remain strong, it wouldn’t be surprising to see a corresponding Harris trade emerge, focusing on sectors like clean energy and health care.

Nevertheless, if your primary objective is to build wealth for essential milestones—be it retirement, education, health care, or the acquisition of a new vehicle or home—it’s wise to steer clear of these speculative trades. Instead, I advocate for a long-term investment strategy. This involves maintaining a steady investment in low-cost index funds that encompass a broad spectrum of the stock and bond markets.