Financial encyclopedia

Every May, whether you are on Wall Street or in Central, Hong Kong, the stock market always echoes with two old sayings: "Sell in May" and "May is poor, June is desperate, July will turn around". Despite the differences in Chinese and Western cultures, the observation is consistent: May is not a good time for stock trading. Is it superstition? Or is there any basis for it? 

Traceable data support 

Take the Hang Seng Index as an example. From 2000 to 2024, the average return in May was approximately -1.3%, and in June it was -0.8%, making them among the worst-performing months of the year. In July, however, the average return rebounded to +1.2%, which aligns with the saying "July sees a turnaround". 

In the US stock market, the S&P 500 has an average return of around 2% from May to October since 1950, while it can reach as high as 7% from November to April. Although it may not experience a significant decline, its performance in summer is notably weaker. The saying "Sell in May" is supported by statistical evidence. 

Why was May particularly weak? 

The first-quarter results of the news vacuum have been released, and the market lacks new catalysts. 

Trading is quiet as European and American funds enter the summer mode, with volumes falling. 

Macro risks such as the China-US relationship and expectations of interest rate hikes tend to erupt in the middle of the year. 

The market generally expects a shift to a conservative stance during this period, considering it high-risk and tending to reduce holdings. 

Amplified emotional fluctuations and pessimistic expectations can easily trigger stop-loss and selling, thereby expanding the range of price movements. 

Where did the funds go? 

Funds do not really "disappear", but are redeployed. 

Shift to defensive sectors (such as utilities, healthcare, and consumer staples) 

Increase holdings of safe-haven assets (such as gold) 

Park in low-volatility products, such as income-generating ETFs or money market funds. 

How should investors respond? 

Long-term investors: No need to make significant portfolio adjustments due to the month effect 

Those who have made profits: It is advisable to consider reducing positions in phases in May and redeploying. 

The key point is not about "staying or leaving" but understanding how to adapt the pace in line with the situation. 

Whether it's the "Sell in May" rule or the saying that "May is poor and June is desperate", they are not simply superstitions but reflect the flow of market funds and psychological cycles. 

A truly astute investor does not blindly believe in months but pays attention to the logic and rhythm behind them, making timely adjustments to achieve steady success.