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Sell in May and Go Away

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The following charts illustrate the irrefutable stock market power in the year before a presidential election. As you can see there is no other year quite like year three in the presidential election cycle in terms of consistent gains from stocks. The average return in year three is 16.9%, compared to 6.7%, -0.1%, and 5.9% in years 1,2,4 respectively. Year three also has the lowest standard deviation of the four.

“In the first seven months of the third year since 1960, Year 3 has returned 2.5% per month for a total of 20% real (after inflation adjustment). In contrast, the second five months after May have delivered an average return of 0.5% month, as does the fourth year of the cycle,” writes institutional money manager Jeremy Grantham of GMO. In other words, based on his study, the lion’s share of gains have already been seen for Year 3 of this presidential election cycle. The stock market performance in year three brings added meaning to the phrase “sell in May and go away.”

 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.