Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink, financial planner at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Thanks again for having me.
Brandy Auterson-Hurst:
So there’s an old saying on Wall Street, sell in May and go away. Now that we’re in May, do you think investors should be taking that advice?
Nate Kreinbrink:
So this is one of those sayings that gets thrown around a lot this time of year, but what’s interesting is there’s some actual data behind this. And I think I brought along a chart here today that kind of gets into this. So this chart is crunching every day of the Dow Jones data, and is mapping out what the average year looks like going back to 1950. So we’re talking about over 75 years of history here. What we see is the pattern here is pretty eye-opening. From roughly May through October, the Dow has historically gained less than a percent on average, which you can see there in the red line. Now if you compare that to the other six months of the year, the average gain has been slightly over 7%, which is there in the blue line. So simply put, about 90% of the stock market’s long run gains have come in just over half of the calendar year.
Now we don’t know exactly why this pattern exists. Some people point to trading slowing down over the summer. Others look at when institutional money tends to move, but it has been remarkably consistent over a very long period of time.
Brandy Auterson-Hurst:
Okay. So should investors be selling right now?
Nate Kreinbrink:
Not necessarily. And here’s why. So this is a historical average, not a guarantee. And right now the current environment is better than what a typical May tends to be. April was one of the best months for stocks in nearly five years. Earning season has come in strong. The markets have recently hit fresh all time highs and this typically isn’t a backdrop for a week summer. So the bottom line is these seasonal patterns are a piece of the puzzle, but we need to look at the big picture.
Brandy Auterson-Hurst:
All right, Nate, thanks for your insight today.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.