Seasonality of Equities

Here is my contribution to the discussion of the seasonality of monthly returns for equities. The chart shows, for the S&P 500, the average return, standard deviation of those returns, and the percent of months that had positive returns. The analysis looks at the last 30 full calendar years of monthly returns.

The old adage of "sell in May" appears to have some basis for validity but is it enough to trade profitably? The months of June, August, and September had negative returns on average. Note the deviations of the returns were elevated in the August to October time frame. However, over 30 years, for each month there were more positive returns than negative. In fact, November and December had high average returns and were positive more than 70% of the periods.

Finally, keep in mind that with low average returns and standard deviations in the 4-5% range, large losses can obviously occur any time. In a market that appears to want to constantly drift high, a two standard deviation move would be meaningful. More to ponder as the leaves change color.