Halloween Strategy - The stock market rule "Sell in May and go away" in analysis!
One of the best known stock market rules is "Sell in May and go away". Especially in the period from the end of April to the end of May, when nervousness regularly sets in on the financial markets, this stock market wisdom is booming. But what is really behind it and can investors really achieve a better performance with it? Simply put, it's about selling in May and then not getting back in until the fall. This is why this approach is also known as the Halloween strategy. We have taken a close look at this stock market rule and tested its truthfulness.
Is May really a yield killer?
A look at the past shows some examples that seem to confirm the "Sell in May" thesis. For example, May is the worst month for both the DAX and the Dow Jones after September. However, it is worth taking a closer look here. The stock market weakness in May is rather a phenomenon of the recent past. If you look at the Dow Jones Index since its introduction in 1897, for example, there are no particular anomalies. The May runs here completely inconspicuously sideways. So is it all just scaremongering?
If you look at the history of the DAX, it becomes clear that the best time to sell is not in May, but in July. This can be seen from the data of the last 30 years. Prices regularly go down in August and September and then do not recover until October.
The disproportionately good performance in December is due to the seasonal phenomenon of the Christmas rally. August and September are also conspicuous for their negative values. August saw an average decline of 2.6 percent and September 2.4 percent.
A look at the regularity of the average performance shows a similar picture. In the summer months of August and September, only 46 percent of transactions resulted in a profit. By contrast, the hit rate in December, for example, was 84.6 percent.
Is it all just coincidence?
So where does this seasonally weak performance come from? Institutional investors are an important factor. Fund managers invest more capital in winter with Exness bonus. In the summer, they tend to try to skim off the returns achieved. In addition, lower stock market turnover during the vacation season puts pressure on investor euphoria. However, the statistics are also distorted by some major crashes in August and September. These include the Asian crisis in 1997, the Russian crisis in 1998, the stock market crash after September 11, 2001 and, of course, not forgetting the Lehman bankruptcy in September 2008.
"Sell in Summer" as a simple stock market strategy
Anyone who wants to take advantage of the statistical patterns can do so relatively easily. For example, investors can purchase an ETF on October 1 that exactly tracks the performance of the DAX. This is then sold again on July 31 of the following year. Then hold cash for two months and then the whole thing starts all over again.
This seasonal strategy is also called "Sell in Summer" or, depending on the time of entry, Halloween strategy. It belongs to the category of mechanical timing strategies. There are fixed rules for the investment and clear specifications at which time which shares are bought or sold. Sell in Summer" is by far one of the simplest stock market strategies.