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May-Oct. Equity Market Weakness Has Not Been Just a U.S. Phenomenon

The May through October seasonal softness, often referred to as the “Sell in May” period, is not just a U.S., large-cap phenomenon. It has also been witnessed in the mid, and small-cap indices. Indeed, since 1998, while the S&P 500 recorded an average 5.9% total return from November through April, it rose only 0.7% in the May through October period.

Global Seasonal Defensiveness: Average Total Returns May-October 1998-2015

In addition, while the S&P MidCap 400 and SmallCap 600 Indices gained 10.6% and 10.1%, respectively, from Nov.-April, they rose only 0.2% and 0.5% in the May-Oct. periods. Finally, while the S&P Developed Ex-U.S. Broad Market Index (BMI) and Emerging BMI Indices advanced an average of 7.0% and 11.5%, respectively, from Nov.-April, they declined an average of 0.1% and 0.2% in May-Oct.

Since each of the five S&P regional and cap-size benchmarks experienced substantially reduced returns during the six months from May-Oct., as compared with results for the Nov.-April period, it may come as little surprise that each of these indexs’ low volatility subset significantly outperformed its parent during this period of seasonal weakness. From May-Oct., each of the five benchmarks recorded average total returns that were between -0.2% to +0.7%. However, the low volatility subset returns ranged from +1.0% to 3.1% during this same period. Of course past performance is no guarantee of future returns.

Follow Sam on Twitter at @StovallSPGlobal.

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