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 Industrials Average only during the first three trading days of May since 1934.
Figure 1 – Growth of $1,000 invested in Dow Industrials during 1st three trading days of May (1934-present)
Figure 2 displays the growth of $1,000 invested in the Dow Jones Industrials Average only during trading days 4 through 16 of May since 1934.
Figure 2 – Growth of $1,000 invested in Dow Industrials during trading days 4 through 16 of May (1934-present)
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.
Figure 3 – Growth of $1,000 invested in Dow Industrials during trading days #17 and higher during May and the 1st five trading days of June (1934-present)
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.
Figure 4 – Growth of $1,000 during Segments 1 and 3 (blue) versus Segment 2 (red)
*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
*Segments 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 to the band wagon.
At least for another 13 trading days.….
Jay Kaeppel
