"Sell in May and go away" is an age-old investment adage, referring to the traditional belief that stocks show weaker performance in the summer, from May to October, and stronger performance in the winter, from November to April. According to the saying, you should sell stocks in spring, just before the summer lull, and buy them in autumn, just before their value rises again. It’s sometimes also called the "Halloween indicator".
There is a good deal of truth to this. Findings from a 2002 paper showed that this pattern held true in 36 of 37 developed and emerging markets studied globally, and was particularly strong in Europe. The paper noted evidence for it in the UK stretching back to 1694.
The effect may be caused by seasonal fluctuations in optimism among investors.
But there are other adages that suggest investing in other times of the year, like the “January effect” – an increase in stock prices during the first month of the year – or December’s “Santa Claus rally”, a similar boost that has been linked to holiday-season optimism (and Christmas bonuses).
So, what gives? Is one time of year better than the other to invest?