Like a creeping vine, the S&P 500 has continued its climb to all-time highs, securing two more new-high footholds in the past week alone. Month to date through May 22, the S&P 500 is up 1.9%. The question almost always arises regarding the market’s performance in the May-October period once the 500 has notched a gain in May. These questioners also wonder if the likelihood of suffering through a decline of 5% or more diminished greatly once we got past May. The answer is yes.
In the 69 years from 1946 through 2014, the S&P increased an average 1.3% in price during the May through October period, and recorded a six-month price advance 64% of the time. However, this six-month price change jumped to 3.5% whenever it started out on the right foot, meaning that the S&P 500 gained in price in May. And that’s not all. The frequency of posting a six-month price increase rose from 64% to 87%. Since 1946, a little more than half (53%) of all declines in excess of 5% started in this May-October period. Yet whenever the market successfully maneuvered through May, this frequency of decline fell to only 32%.
So there you have it. Once Jason safely navigated the Argo past the clashing rocks, his quest to find the Golden Fleece became a bit easier. So too history says, but does not guarantee, that the S&P 500’s journey to November will likely become less treacherous should we successfully sail through this quickly concluding month of May.