Should you 'Sell in May and go away'?
The ASX 200 averages a 0.7% gain from May to October since 1990, and up only 54% of the time, making it one of the weakest 6-month windows
Source: Shutterstock
KEY POINTS
- The S&P/ASX 200 averages a 0.7% gain from May to October since 1990, and up only 54% of the time, making it one of the weakest 6-month windows
- May is the second-worst month for Australian equities, with an average decline of 0.39% since 1990 and notable volatility over the past decade
- Despite historical trends, the ASX 200 enters May 2025 with a 13.3% reversal from April’s low, the seventh-largest since 2000
- Investors shouldn’t blindly sell in May, as returns are still positive on average, and current momentum suggests potential upside amid trade-related uncertainties
As May arrives, investors often ponder the age-old question: Should I sell now and return in October to catch the Santa rally?
The "Sell in May" adage is rooted in historical data, which shows that the S&P/ASX 200 — and many global benchmarks — tends to underperform during the May-to-October period compared to other 6-month windows.
Here comes the worst six months of the year
Since 1990, the S&P/ASX 200 has averaged a 0.7% rise over these six months, and positive only 54% of the time.
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Source: Market Index (1990 - current)
Even on a total return basis, May to October ranks second-to-last among all 6-month periods, with the lowest percentage of positive outcomes.
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Source: Market Index (2002 - current)
A closer look at May
Zooming in on May itself, the month has been particularly challenging. Over the past decade, it’s been a volatile time for the ASX 200.
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Source: Market Index
Since 1990, May ranks as the second-worst month for Australian equities, with an average decline of 0.39%.
A massive reversal
Despite this historical weakness, the S&P/ASX 200 is entering May 2025 with significant momentum. In April, the index rallied 3.6% by month-end, recovering from an intra-month drop of 8.6%. This 13.3% rally from the low marks the seventh-largest monthly reversal since 2000.
Such dramatic turnarounds are rare, typically occurring during extreme market conditions like the Global Financial Crisis or the pandemic. Historically, these reversals often lead to positive forward returns across multiple timeframes — one, three, six, and twelve months. The 2007 reversal stands out as an outlier, preceding the market crash during the Global Financial Crisis.
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Source: Market Index
The historic forward returns implies some degree of volatility in the near-term, with average one-month returns of 1.9% but positive only 66% of the time. This suggests that the volatility shock, coupled with its underlying trigger, often leaves the market in an uncertain and vulnerable state.
While the May-to-October period has historically been the weakest six months for the ASX 200, returns are still positive on average, suggesting it’s not wise to blindly sell based solely on the calendar.
