May officially marks the beginning of the “Worst Six Months” for the DJIA and S&P. To wit: “Sell in May and go away.” Our “Best Six Months Switching Strategy,” created in 1986, proves that there is merit to this old trader’s tale. A hypothetical $10,000 investment in DJIA compounded to a gain of $1,352,316 for November-April in 74 years compared to just $2,910 for May-October (STA 2025, page 54). The same hypothetical $10,000 investment in the S&P 500 compounded to $1,175,668 for November-April in 74 years compared to a gain of just $13,472 for May-October.
May has been a tricky month over the years, a well-deserved reputation following the May 6, 2010 “flash crash”. It used to be part of what we once called the “May/June disaster area.” From 1965 to 1984 the S&P 500 was down during May fifteen out of twenty times. Then from 1985 through 1997 May was the best month, gaining ground every single year (13 straight gains) on the S&P, up 3.3% on average with the DJIA falling once and NASDAQ suffering two losses.
In the years since 1997, May’s performance has been erratic; DJIA up fifteen times in the past twenty-seven years (four of the years had gains exceeding 4%). NASDAQ suffered five May losses in a row from 1998-2001, down –11.9% in 2000, followed by fifteen sizable gains of 2.5% or better and seven losses, the worst of which was 8.3% in 2010 followed by another substantial loss of 7.9% in 2019.
Post-election Year Mays have historically performed well, registering average gains on DJIA and S&P 500 of 1.3% and 1.6% respectively. DJIA and S&P 500 have advanced in every post-election year May beginning in 1985. Russell 1000 has been up eleven years straight in post-election year Mays. NASDAQ and Russell 2000 have also recorded impressive average gains of 3.0% and 3.6% respectively.
Over the last 21 years, the first three days of May have historically traded higher, and the S&P 500 has been up 18 of the last 27 first trading days of May. Bouts of weakness often appear around or on the fourth, sixth/seventh, and twelfth trading days of the month while the last four or five trading days have generally enjoyed respectable gains on average, but the last day of May has weakened noticeably with only NASDAQ fractionally advancing.
Post-election year May historical performance is impressive when compared to the recent 21-year trend. Early strength has lasted until around the sixth trading day with average gains exceeding 1%. A brief period of weakness has occurred between the sixth and ninth trading days, but afterwards the trend has been briskly higher through the end of May. The divergence between DJIA/S&P 500 and NASDAQ, Russell 1000 and Russell 2000 that begins just after mid-May, is due to additional years for data. DJIA and S&P 500 were much weaker during post-election years from 1953 to 1981.
Monday before May monthly option expiration has been stronger than monthly expiration day itself. S&P 500 has registered only eleven losses in the last thirty-five years on Monday. Monthly expiration day is a loser nearly across the board except for Russell 2000 with a slight average gain (+0.01%). The full week had a bullish bias that is fading in recent years with DJIA down seven of the last nine and S&P 500 down six of the last eight. The week after options expiration week tends to favor tech and small caps. NASDAQ has advanced in 25 of the last 35 weeks while Russell 2000 has risen in 26 of the last 35 with an average weekly gain of 0.82%.