You’ve no doubt heard the phrase “sell in May, and go away” in reference to sluggish price action accompanying recent stock market activity. The saying rhymes, it’s catchy and it’s fun to use. Heck, I’ve even bandied about the phrase myself in recent days when the market struggled.

In general, I’m a fan of market “truisms.” For the most part, such phrases became a part of market lore because they were rooted in some truth along the way. Ideally, I’d like to latch onto “sell in May, and go away” as a reliable catch phrase for trading action during the month of May forever. Many of us, after all, are reeling in May from the April tax bill, and we’re just not in the mood to scrape together new investment funds. What’s more, we might be socking away extra cash to pay for our upcoming summer vacation. It seems like Mother’s Day is about the only good reason to open our wallets during May.

With that in mind, I fully expected an analysis of May trading activity over the last 10 years to solidly back the “sell in May, and go away” premise. Alas, it just didn’t hold up to scrutiny. Over the last 10 Mays, small-cap stocks have been down just four times, and up on six occasions. The average decline on down years was 5.4%, and the average gain on rally years was 4.3%. If we exclude the meaty 10.6% rise back in 2003, then the velocity of the move on down years clearly is more powerful than the advance on up years, but 4 of 10 just isn’t good enough to rely on “sell in May, and go away” as a trading truism anymore.

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