The document examines several long-held stock market anomalies and legends, such as "sell in May and go away" and the January effect. While the data behind these anomalies seems compelling initially, the document notes that many do not hold up over the long-term or in recent years. For example, a portfolio reflecting "sell in May and go away" did not consistently outperform a simple buy-and-hold strategy. The January effect and January barometer also have not predicted market performance reliably in recent years. The conclusion is that investors should stay invested and consider multiple data sources and perspectives rather than relying on isolated anomalies.

1. Market Perspective – May 2017
Experience Insight Impact
Overview: Over the years, many stock market “legends” have been introduced. For
example, associated with the season of spring is the expression “sell in May and go
away.” In this month’s issue, we examine some of these long held views. While there
is interesting data behind these market anomalies, we are mindful that many of them
can be the result of data mining and can be extremely difficult to translate into
actionable trades.
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2. Sell in May and Go Away
Experience Insight Impact
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Returns during the cooler months significantly outpaced returns during the warmer months.
Since 1928, $100 invested in the S&P
500 during the November through April
period would now be worth $4,270.
However, $100 invested during the May
through October period would only be
worth $257. The trend is similar over
the last 50 years ($2,136 for November-
April vs $139 for May-October) and over
the last 20 years ($343 for November-
April vs $98.50 for May-October).
Source: Factset
Source: Investment U

3. Sell in May and Go Away: Reality
Experience Insight Impact
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• Despite the striking statistic, “Sell in
May and go away”, a portfolio
reflecting these actions did not
outperform the simple buy-and-
hold portfolio over the long-term.
• We would also point out that there
have been numerous times where
this has not worked. For example, in
2009, investors would have missed
out on 20.5% in gains (excluding
dividends) not being invested during
the warmer months.
• There is also an element of
randomness to the exact timing,
which presents the distinct
possibility of data mining. Source: CXO Advisory Group, Forbes

4. January Effect
Experience Insight Impact
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The January effect is a seasonal increase in stock prices during the month of January.

5. January Effect: Recent Performance
Experience Insight Impact
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However, recent S&P 500 January performances have been poor, especially since the crisis in 2008.
January 2015 and January 2016 also produced losses in excess of 3%. This trading strategy has been
inconsistent over time.
Source: CNBC

6. January Barometer
Experience Insight Impact
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Another market legend is that January’s return predicts the direction of the stock market for the whole year.
The above scatterplot of Full Year Return vs. January Return shows some evidence of a predictive nature.

7. January Barometer: Recent Evidence
Experience Insight Impact
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However, the recent
track record for the
January Barometer
has been poor.
Trading based on the
January Barometer
would have led to
missing out on some
of the greatest rallies
post Great Financial
Crisis of 2008.
It is frequently
pointed out that
correlation is not the
same as causation.
+15.8%
+5.5%
-37.0%
+26.5%
+15.1%
+2.1%
+16.0%
+32.4%
+13.7%
+1.4%
+12.0%
S&P 500 Return
Source: Business Insider, Wolf Street

8. Conclusion: We have examined several supposed market anomalies surrounding the
stock market. In some cases, the initial data may seem compelling. However, we
remain mindful that most of these anomalies do not have sound reasoning and data
mining is partially to blame. In essence, it is important to stay invested and evaluate
the investment landscape through multiple sources of data, considering different
perspectives, and drawing conclusions that can be backed by fundamental reasoning.
Experience Insight Impact
Market Perspective – May 2017
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9. Experience Insight Impact
Disclaimer
Opinions expressed in this commentary may change as conditions warrant and is for informational
purposes only. Information contained herein is not intended to be personal investment advice for
any specific person for any particular purpose. We utilize information sources that we believe to
be reliable but cannot guarantee the accuracy of those sources. Past performance is no guarantee
of future performance; investing involves risk and may result in loss of capital. Consider seeking
advice from a professional before implementing any investing strategy.
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