Sell in May and go away?

There are many old trading saying. “Sell in May and go away” is one of the well-known ones referring to stock market investors who bail on stocks in the summer months, when returns tend to moderate, and reinvest in the fall.

Of the three main stock indices, the Dow Jones took the biggest hit to the downside this past week. Front month Dow futures hit a high of 39,882 points last Friday and had seen a low of 38,111 points this past week as of Thursday’s close, which would constitute a 4.4% drop in less than a week’s time.

A sizable one week move lower, but the S&P and Nasdaq indices weren’t nearly as rattled, dropping less than 2% on the week after making fresh new all-time highs the week before. Nothing to get shaken or stirred about but if old sayings and seasonals are your thing, it could very well mark a spot in time where a short-term risk off adjustment makes sense.

If you’re not into old sayings or seasonals but prefer chasing headline news, you could also lean into the circus that is this year’s coming presidential election. New lows were reached in expectations for voters as former President Trump was found guilty on 34 counts of falsifying business records in a New York court.

Politics aside, this event will likely lead to more disappointment for voters on both sides, whose expectations were already record low for the coming election. Disenchantment for those in the middle is less of a concern than the extremes on either side who may feel disenfranchised on November 5 if their side loses.

The good news is recent history would suggest concerns over who is elected are overrated, at least when it comes to the stock market. Since 2004 the Dow Jones has been higher every November than the one preceding it after a presidential election year, and there has been plenty of turbulence in those times. The time between May and November in an election year isn’t always the best time to invest (unless a pandemic happens, giving way to panicked lower prices followed by helicopter money from governments around the world).

Whether our next president is in jail or a nursing home, history tells us the future is brighter than we give it credit for.