Don’t Sell in May to Breakeven

At the risk of stating the obvious, stocks embarked on a wild ride last month. Markets fell sharply after President Donald Trump’s “Liberation Day,” when bigger-than-expected tariffs roiled sentiment. At the time, we counseled patience. With stocks having rebounded and fears still swirling, some think now is the time to hit the exits—especially with the supposedly weak part of the calendar upon us. Here again we counsel patience and remind you: The only basis for action in markets is knowing something others don’t. Past returns or calendar-based myths don’t qualify.

Let us revisit early April. Markets plunged after Liberation Day’s announcement, which happened after market close on April 2, through April 8. The S&P 500, Nasdaq and MSCI World Index plummeted -12.1%, -13.2% and -11.3%, respectively, while the MSCI Europe Index fell -11.1% through its low on April 7.^[i] These steep drops brought them close to—and in the Nasdaq’s case, past—the traditional bear market threshold of -20% from year-to-date highs. From February 19 – April 8, America’s S&P 500 and Nasdaq were down -18.7% and -23.8%, respectively.^[ii] Globally, returns weren’t as poor. The MSCI World Index tumbled -16.6% from February 18 – April 8 while Europe fell -14.2% from its year-to-date high on March 18 through April 7.^[iii]

Then on April 9, Trump delayed all reciprocal tariffs for 90 days, fueling a historic up day. Since those early-April lows, stocks have rebounded sharply. The S&P 500 and Nasdaq are up 12.6% and 16.9%, respectively, while the MSCI World jumped 13.5%.^[iv] Europe has climbed 18.0% and recouped its entire slide.^[v]

That recovery has some considering whether now is a time to get out while the getting is good.Especially since, with May underway, the traditional “Sell in May and Go Away” mantra has returned, with some counseling this year especially merits trying to avoid stocks’ supposed summer doldrums.

Historically speaking, the S&P 500’s returns from May – October are weaker than November – April, and there are times selling in May “works” (with 2022 the most recent example). But don’t lose sight of the bigger picture. For example, exiting markets in May means missing out on a month with historically positive average returns. (Exhibit 1)

Exhibit 1: Don’t Miss May

Source: Finaeon, Inc. and FactSet, as of 5/5/2025. S&P 500 Total Return Index, monthly (average), 12/31/1925 – 4/30/2025.

The supposedly weakest six-month stretch of the calendar beginning in May, April 30 – October 31, is also still nicely positive overall, with stocks in the black close to 73% of the time. ^[vi] (Exhibit 2) Historically speaking, “selling in May” would mean your portfolio misses out on valuable growth.

Exhibit 2: Sell in May and You May Miss Out

Source: Finaeon, Inc. and FactSet, as of 5/5/2025. S&P 500 Total Return Index, monthly (average), 12/31/1925 – 4/30/2025. 

The rationale underpinning this popular seasonal adage is also fundamentally flawed: It presumes a change in the calendar matters to stocks. Recent volatility dampens that theory. A calendar change to April (one of the year’s strongest months) didn’t prevent the correction. Rather, markets reacted negatively to Trump’s trade policy, which was more sweeping and larger in scope than anyone anticipated. Volatility can show up any day, week or month. As Mark Twain’s Pudd’nhead Wilson put it, “October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February.” Whether stocks rise or fall in a given period, it won’t be because of the month.

A rebound following a stinging decline can also inspire a desire to sell, and recent advocacy to “Sell in May” may be related to what we call “breakevenitis.” When stocks start to near recovery from a challenging stretch, many investors plan to exit the market, reasoning they “broke even” and can’t risk another pullback—or they just don’t believe the rally is real. However, this fearful reaction also presumes what just happened determines the future. We understand taking action in response to negative volatility may bring a feeling of short-term relief, but succumbing to breakevenitis can carry a major opportunity cost: missing out on the positive volatility that follows a correction.

To see this, consider two hypothetical investors’ actions following 2023’s market correction, which lasted from August through October. (Exhibit 3) Both entered the correction with portfolio values of $1 million. Investor B exited the market once their portfolio got back to $1 million—which occurred on December 1—and didn’t get back in, earning money market returns for the next 13 months. Investor A remained in global stocks. Not staying in meant Investor A missed out on over $180,000 in growth.

Exhibit 3: The Cost of Giving in to Breakevenitis

Source: FactSet and St. Louis Federal Reserve, as of 5/7/2025. Hypothetical portfolio values based on starting value of $1 million invested in the MSCI World Index with net dividends, 8/1/2023 – 12/31/2024. Investor B liquidates their portfolio on 12/1/2023 after portfolio value returns to $1 million, earning money market returns from December 1, 2023 – December 31, 2024 (based on the FDIC’s Treasury Yield: Money Market <100M time series, December 2023 – December 2024). Investor A maintains full global market exposure.

None of this means volatility won’t return or that we couldn’t see this correction resume with gusto. But fixating on past returns or portfolio values—and myths about bad calendar stretches—won’t help you forecast anything at all.