Why 'Sell in May and Go Away' Might Not Apply in 2026

The age-old market saying 'Sell in May and go away' warns investors to exit stocks during the historically weak May-to-October period. This trend is often attributed to reduced liquidity and increased volatility as traders take summer breaks, leading to poorer returns.

However, 2026 might be an exception. With the S&P 500 and Nasdaq hitting record highs despite geopolitical tensions, experts see potential for continued gains, challenging the traditional wisdom and prompting investors to reconsider their strategies.

The Traditional Wisdom Behind 'Sell in May and Go Away'

Historically, the six-month stretch from May through October has been the weakest for stock market returns. This pattern is often linked to summer vacations reducing trading activity, which in turn lowers liquidity and increases volatility, making markets more prone to sharp declines.

Data going back to 1945 shows the S&P 500 rising only about 2% during this period, with even weaker performance during midterm election years, when the index has averaged a 1.2% decline.

Why 2026 Could Break the Mold

Jeffrey Hirsch, editor in chief of the Stock Trader's Almanac, questions whether this year will follow the usual pattern. Despite ongoing conflicts in the Middle East, the stock market has demonstrated resilience, with both the S&P 500 and Nasdaq Composite reaching all-time highs.

Technical indicators like the Moving Average Convergence Divergence (MACD) suggest the current rally still has momentum, signaling potential for further gains rather than the typical summer slump.

Economic and Geopolitical Factors to Watch

While market momentum is positive, there are cautionary signs. The Atlanta Fed's latest GDP forecast for Q1 2026 dropped to 1.2%, down from earlier estimates above 3%. Additionally, concerns about AI's disruptive impact on the labor market remain unresolved.

A critical factor influencing market direction is the U.S.-Iran conflict. A peaceful resolution and reopening of the Strait of Hormuz could boost investor confidence, especially as rising gas prices have already led to reduced consumer spending.

"If we get a resolution, something more lasting out of the Iran situation, then [the] market's probably going to go higher between May and October."—Jeffrey Hirsch, Stock Trader's Almanac

Adjusting Investment Strategies for 2026

Paul Ciana, chief market technician at Bank of America Securities, also predicts this year will challenge the 'Sell in May' rule. His analysis suggests buying in May and selling in July or August, anticipating weakness later in the summer.

Meanwhile, Hirsch recommends repositioning rather than exiting the market entirely. He favors short-term cash and bond instruments like the iShares 0-3 Month Treasury Bond ETF (SGOV), iShares 0-1 Year Treasury Bond ETF (SHV), and iShares Core U.S. Aggregate Bond ETF (AGG), along with utilities stocks.

"Not necessarily go away, but reposition."—Jeffrey Hirsch

Looking Ahead: What Investors Should Keep in Mind

While historical trends favor caution during the May-to-October period, 2026's unique market conditions and geopolitical developments could lead to a different outcome. Investors should monitor economic data, geopolitical resolutions, and technical signals closely to navigate the months ahead.

Flexibility and strategic repositioning may be key to capitalizing on potential gains while managing risks in this evolving landscape.