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Mark Hulbert: Don’t Always Believe ‘Sell in May and Go Away’

By    |   Thursday, 03 May 2012 07:22 AM

It’s an old saw that stock market investors should “sell in May and go away” until October. But that’s a myth, investment guru Mark Hulbert says.

There was a period when the rule held true, but not recently he writes on MarketWatch.com. He divides the last 116 years of market history into two segments for his analysis.

“Consider first the period since 1896, when the Dow Jones Industrial Average was created, up through the 1980s,” Hulbert writes. “Over that 94-year period, May on average was eclipsed only by September as the worst month of the calendar for the stock market.”

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So clearly during that time, the rule applied.

But, “over the next two decades, in contrast, May became one of the best months of the year,” Hulbert says. “When ranked by average returns over those 20 years, it’s in third place.”

Investors and traders may still respect the rule because of the May 2010 “Flash Crash,” he writes.

But obviously the rule has lost its currency.

Jeff Hirsch, editor-in-chief of the Stock Trader’s Almanac, begs to differ. Instead of just looking at May, he looks at the entire May through October period.

Going back to 1962, the Dow averages a gain of about 7.5 percent from November to April and about 0.3 percent from May to October, he tells Yahoo.

“There is validity [to the rule], though it doesn’t work every year,” Hirsch says.

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Thursday, 03 May 2012 07:22 AM
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