Worst Six Months May-October

Sell in May or Worst Six Months May-October gains have been solid this year, once again bringing out the Sell in May naysayers.


By Jeffrey Hirsch


However, a look at page 32 and 62 of the Stock Trader’s Almanac 2016 will remind you that the Worst Six Months has been quite strong in election years. The positive mindset of electing a new commander in chief helps buoy U.S. equities throughout the second half of the year with only two losses in the last seven months of election years.

So with the S&P 500(NYSEARCA:SPY) up 5.9% so far for the Worst Six Months of 2016, it begs the question, if the S&P is up May-October this year what does that indicate for the next Best Six Months, this year and next as a whole?

In the table above of Great WSM, the next BSM is up 23 of 26 years with an average gain of 9.2%. The year as a whole is even better, down only once with an average gain of 20.9%. The following year is also pretty good, though not as much, up 73.1% of the time with an average gain of 10.1%, this indicates that the greater the election year WSM gains are, the greater the likelihood of gains in the subsequent BSM, this year and next.

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However, as you can see, the post-election year, next year, is prone to weakness across the board. Note that there are only two election years since 1950 not in this bunch, 1956 (Russian invades Hungary in October) and 2008 (Great Recession). With seven weeks left in the current WSM, the September/October disaster area upon us and the polls showing Trump gaining traction, it remains to be seen if the gains will hold.