Sell in May? It's better to build
a portfolio for all seasons

Key takeaways:

• Seasonality is just one factor that influences market dynamics.
• Macroeconomic trends and trade policy signals, intricately linked to the current climate, are likely to mitigate the impact of seasonal patterns in 2025.

05/07/2025 – "April is the cruelest month," as T.S. Eliot famously wrote—and for investors, this past April lived up to the line. Policy uncertainty rattled markets, leading to historic intraday volatility, notable technical breakdowns in market internals, and a sharp deterioration in investor sentiment. Yet, despite the turbulence, the S&P 500® Index ended the month with only a modest 0.8% decline, recovering significantly after being down over 11% earlier in April.

This resilience highlights the importance of maintaining a long-term investment perspective—even when markets feel anything but steady. As we turn the page to May, another familiar (if less poetic) market adage comes to mind: "Sell in May and go away." The logic behind this old market maxim is grounded in historical trends: stocks have typically underperformed during the six-month stretch from May to October. As a result, some investors have opted to rotate into bonds or cash during this period to sidestep weaker equity returns.

This strategy is essentially market timing—just stretched over a longer horizon. And as financial professionals often remind clients, time in the market typically matters more than timing the market. While seasonality can influence market behavior, it's just one of many factors at play. In today's environment, macroeconomic trends and evolving trade policy signals are likely to play a more dominant role, potentially muting the impact of historical seasonal patterns in 2025.

What should investors expect as May unfolds? Historically, the six-month period beginning in May has been the weakest stretch for market performance. Empirical data shows the S&P 500 has averaged just 1.8% during this timeframe, with positive returns occurring about 65% of the time. Given April's underwhelming performance, seasonal headwinds may persist in May, adding another layer of caution for investors.

In post-election years, May has historically provided a bullish tailwind for equities, with the S&P 500 averaging a monthly gain of around 1.6%. However, this historical trend may face headwinds in 2025. The current macroeconomic backdrop—marked by policy uncertainty and growing concerns over a global slowdown—could challenge the seasonal optimism typically seen during this period.

This is why investors shouldn't make decisions based solely on historical maxims or seasonal trends. April serves as a timely example. Historically, it's been one of the top three months for stock market returns—often buoyed by inflows from taxpayers making IRA contributions before the April 15 deadline or allocating tax refunds into equities. Yet, this past April defied that trend, reminding us that historical patterns don't always hold in the face of broader market forces.

April's market turbulence serves as a reminder that seasonal trends can be misleading. Instead, investors should stay focused on the fundamental drivers of market performance: corporate earnings, monetary policy, and economic growth. Building a well-diversified portfolio designed to weather all seasons—and aligning it with long-term financial goals—is the most reliable way to navigate even the cruelest stretches of market volatility.