Calm before the storm? Seasonal weakness meets compressed volatility
SPY•Seasonal weakness meets compressed volatility
“Sell in May and go away” is one of Wall Street’s oldest market sayings. The idea is simple: sell your stocks around May 1, sit out the summer months, and then return to the market around Halloween, or November 1.
The catch? The data suggests it’s far from a foolproof strategy.
According to LSEG data, the S&P 500 gained an average of 2.1% between April 30 and October 31 from 1950 through 2025, with a median return of 2.7%. By comparison, the index rose an average of 6.9% from October 31 through April 30, 2026, with a median gain of 6.2%.
While the November-to-April period has historically delivered stronger returns, stocks have still finished higher during the May-to-October stretch in 51 years, compared with declines in 26 years. Put another way, “Sell in May” has only really worked about one-third of the time. The most recent example came in 2022, when stocks fell during a bear market that began in January and bottomed in October.
This year is another reminder that seasonality is no guarantee. Since April 30, the S&P 500 has gained about 3.3%, even though the benchmark is down roughly 1.3% so far in July, a month that has historically been one of the market’s stronger months.
Still, investors are about to enter what has traditionally been a weaker stretch for stocks.
August and September are historically softer months
The chart below shows the S&P 500’s average monthly returns from January 1950 through this month. August has been the weakest positive month, with an average gain of just 0.04%. September has been the clear laggard, posting an average decline of 0.63% and ranking as the market’s worst month on average.
Yet one factor may be worth watching beyond the calendar. The S&P 500's daily volatility has remained unusually subdued, even as investors grapple with geopolitical tensions, tariffs, earnings and Fed uncertainty.
Again, seasonality is no guarantee. But with the S&P 500's daily volatility remaining unusually compressed, a larger move — in one direction or the other — may be just around the corner.
