The beginning of the month of May and the end of the month of May into early June have overall been a decent time to be in the stock market. The middle of May, typically not so much.
For our purposes, we will split May (into June) into three segments:
- Segment 1: The first 3 trading days of May (bullish)
- Segment 2: May trading days #4 through #16 (bearish)
- Segment 3: May trading day #17 through the 5th trading day of June
Figure 1 displays the growth of $1,000 invested in the Dow Jones Industrial Average only during the first three trading days of May since 1934.
Figure 2 displays the growth of $1,000 invested in the Dow Jones Industrial Average only during trading days 4 through 16 of May since 1934.
Figure 3 displays the growth of $1,000 invested in the Dow Jones Industrials Average only from the close of May trading day #16 and the close of the 5th trading day of June.
Combining and Comparing
In Figure 4 the blue line displays the growth of $1,000 invested in the Dow only during Segment #1 and Segment #3. The red line displays the growth of $1,000 invested in the Dow only during Segment #2.
- During Segments #1 and #3 the Dow gained +157.5%
- During Segment #2 the Dow lost -51.1%
During 2016:
- Segment #1 extends from the close on 4/29/16 through the close on 5/4/16
- Segment #2 extends from the close on 5/4/16 through the close on 5/23/16
- Segment #3 extends from the close on 5/23/16 through the close on 6/7/16
Summary
So is the Dow sure to gain ground during Segments #1 and #3 and to lose ground during Segment #2? Not at all.
For the record:
- Segments 1 and 3 combined have gained an average of +1.2%, with 65% of years showing a gain and 35% showing a loss
- Segment 2 has lost an average of (-0.8%), with 49% of years showing a gain and 51% showing a loss
So clearly there are no “sure things” being unveiled here. Still, if the early days of May see the stock market register a meaningful gain, it might make sense to avoid jumping on the band wagon.
At least for another 13 trading days.….