iQ Sell in May & Go Away Model
ABOUT THE MODEL
The iQ Sell in May & Go Away Model selects large-cap stocks during the months of November through April and intermediate-term Treasury bonds the remaining six months.
RULES-BASED SELECTION PROCESS:
The iQ Sell in May & Go Away Model employs the following unemotional rules-based process:
November through April - OWN STOCKS
Select the largest 250 stocks from the S&P 500 Index.
Sort by six month return and select the top 50 stocks.
Sort the remaining 50 stocks by low price-to-earnings and high sustainable growth ratios and select the top 10.
May through October - OWN BONDS
Own 10-20 year Treasury Bonds (via ETF ticker TLH).
This model reconstitutes every May and November
SELL IN MAY and GO AWAY (aka the “Halloween Strategy”)
The "Sell in May and go away" strategy is based on the idea that the stock market tends to underperform during the summer months, and then tends to pick up again in the fall. Proponents of this strategy believe that by selling their stock holdings in May and then reinvesting their funds back in the market in November, they can avoid the potential losses associated with the summer doldrums.
iQUANT.pro has observed a substantial difference in historical returns during the November through April timeframe versus the remainder of the year. In addition, we have found that bonds have doubled the returns of stocks May through October.
The first chart below shows that (with the exception of Consumer Staples) every S&P 500 sector has substantially outperformed during the months of November through April (since 1999). The second chart shows that the Sell in May anomaly is also present in all of the investable continents.
Seasonality per Sector
Seasonality per Continent
Please note that the 'Sell in May and Go Away' investment strategy is a popular adage suggesting that investors should divest their holdings in May and repurchase them in November, aiming to avoid seasonal market declines during the summer months. However, it is crucial to understand that this strategy is based on historical observations and may not guarantee future investment success. Market behavior can be influenced by various unpredictable factors, and timing the market based on seasonal patterns involves inherent risks.