“Sell in May” Update

How has the simple Sell in May strategy worked in the modern U.S. equity market, defined as the time since introduction of SPDR S&P 500 ETF Trust (SPY)? To investigate, we:

• Calculate 6-month SPY returns from the ends of April and October.
• Find yields for 6-month U.S. Treasury bills (T-bills) at the end of each April, and the yield for 3-month T-bills at the end of January 1993 for the initial interval.
• Generate returns for a strategy that holds SPY during November through April and T-bills during May through October, with switches at the ends of April and October.

We assume 0.1% frictions when switching between SPY and T-bills. We ignore tax implications of trading. The benchmark is buy-and-hold SPY. Using the specified data from the end of January 1993 through March 2024, we find that: (more…)