How did the stock market perform during the summer?

May to October is historically the weakest months in the market. Since 1896, the Dow (index of 30 largest companies in the US) had an average return of: 5.2% (Nov-April) and 2.1% (May-Oct).

This led to the old saying — sell in May and go away. But how has that worked out in 2021? Terribly.

Investors would have missed out on an 8% rise in the S&P 500 since May 1 if they sold. Record non-stop retail buying helped send the market to record highs.

• According to JPMorgan, in each of the past 3 months, US retail investors bought a net $10b plus worth of stocks and ETFs.
• As long as people continue buying, the market will keep rising. But if money starts coming out, then investors should be worried.

But with unemployment benefits ending and a fourth stimulus check unlikely, the net buying of stocks may have peaked.

Should investors sell during the summer? Revisiting some advice from Jonathan Golub of Credit Suisse (via CNBC):

• “Any investment strategy that you can summarize in a rhyme is probably a bad strategy”.
• Golub also argues that the best strategy is to keep capital exposed to the market year in and out.