By Ben Norris, CFA, Senior Investment Strategist, Vice President
The investing adage “Sell in May and go away” suggests that investors should sell their stock holdings in May and reinvest in the fall, typically around Halloween, based on the historical underperformance of stocks during the May-to-October period compared to the November-to-April period. This notion originated in the late 18th century London financial district, when wealthy aristocrats and bankers left the city in May and returned in the fall. Surprisingly, historic data supports the idea that investors can shift their attention elsewhere during the spring and summer months. Since 1970, the S&P 500 (S&P) has consistently outperformed from November to April compared to May to October. From 1970 to 2023, SPX returned 6.5% from November to April, versus just 1.6% in the May-to-October period. The Dow Jones Industrial Average (Dow) and Nasdaq Composite (Nasdaq) show a similar trend.
However, adages are rarely as simple as they seem, especially when it comes to investing. “Sell in May and go away” is no different. While selling out of the market in May seems to be a great path to outperforming the market, a better option—one that is simpler and more cost effective—would be to simply stay invested. According to a study from American Century Investments, $1,000 invested from 1975 to 2024 under the “sell in May” approach would have grown to more than $64,000. Which is certainly not a bad outcome. However, staying fully invested over the same time frame would have turned $1,000 into more than $340,000! By doing nothing but being patient you would have grown your investment more than five times as much, reinforcing the power of compounding. Missing half a year of potential compounding would be a serious detriment over time. An investing adage that we would recommend instead is “time in the market, not timing the market.”
We’ve seen a great example of this lesson in 2025. Since May, the S&P, Dow, Nasdaq and Russell 2000 are each up sharply, with the S&P and Nasdaq reaching new all-time highs. The Dow was the weakest of the group, gaining 8.9% over the last 10 weeks, while the growth-oriented Nasdaq gained more than 16%. This compares to their returns from November 2024 to April, where each index saw gains but failed to match their progress over just the last 10 weeks. The recent strength remains a surprise to both those who follow investing adages and market strategists alike. Despite threats of uncertain trade policy, persistent inflation, elevated stock valuations and angst over the national debt, investors have found a way to remain bullish over the last quarter. Our hunch is that some optimism can be explained by stronger-than-expected corporate profits, while the rest is likely tied to hopes that the U.S. Federal Reserve (Fed) will cut rates later this year. With markets returning to highs, and in turn, elevated valuations, corporate earnings need to meet expectations to keep the party going into 2026.
Last week began on a sour note with stocks trading lower as President Trump announced additional tariffs on goods imported from Japan, South Korea, Malaysia and South Africa. The countries have until August 1 to reach a deal, according to Trump, who also indicated that no more extensions will be granted. Trump also announced that countries aligning with certain anti-American policies expressed by the BRICS (Brazil, Russia, India, China and South Africa) will face additional tariffs. The new focus on BRICS appears to be tied to Trump’s concern that these countries will seek to weaken the status of the U.S. dollar as the global reserve currency. The updated tariff rates announced on Monday were higher than markets expected, reigniting concerns that trade policy could still trigger inflation and weak economic growth.
Tariffs dominated the headlines again on Tuesday as stocks finished mixed. In a change from the recent norm, small-cap stocks were the best-performing group. Copper stocks rose on news that Trump intends to raise levies on copper imports to 50%, although the timing of the change was unclear. Along with 50% on copper, Trump raised the prospect of 200% tariffs on pharmaceuticals unless companies began manufacturing drugs domestically in the next year and a half. The economic calendar on Tuesday was light with the National Federation of Independent Business (NFIB) small business sentiment survey showing a small decline in confidence as companies grew cautious on hiring new workers. One notable takeaway from the report—small businesses plan to raise prices, likely in response to the impact of tariffs.
Stocks closed higher on Wednesday, led by an unlikely duo of technology and utilities stocks. The release of the minutes from the Fed’s June meeting showed that just a handful of committee members supported a rate cut in July, while most preferred to keep rates unchanged while gathering additional data over the coming months. Details of the minutes revealed that the Fed remains concerned about inflationary risks stemming from tariffs. The cautious tone expressed in the minutes saw the market-based expectations for a rate cut in July collapse as expectations shifted toward a September cut. Other concerns raised in the minutes included simmering geopolitical tensions and global economic uncertainty, both of which could weigh on growth. Inflation continues to work its way toward the Fed’s 2.0% target but remains far enough above that level to warrant patience before aggressive rate cuts. Treasury yields fell on Wednesday, which further supported growth stocks.
Thursday brought new record highs for the S&P and Nasdaq amid new tariff announcements and solid employment data. As a follow-up to Tuesday’s BRICS announcement, Trump raised the prospect of 50% tariffs on goods imported from Brazil, unless legal proceedings against former Brazilian president and Trump ally Jair Bolsonaro are halted. Brazil’s current president, Lula da Silva, countered with a threat of a reciprocal 50% tariff on American goods. Looking at the labor market, initial jobless claims remained steady last week as firms are hesitant to lay off staff in a post-Covid era where identifying qualified talent hasn’t been easy. Continuing jobless claims, a measure of people who have been unemployed for an extended period of time, remains just below 2 million, but is at its highest level since late 2021. The American job market has painted a mixed picture in recent months, appearing surprisingly strong according to some measures and increasingly weak according to others.
Fittingly, stocks sold off on Friday due to another round of tariff announcements. This time our neighbors to the north came under fire. Trump announced a 35% tariff on Canada in response to their 400% tariff on American dairy exports and complaints over illicit fentanyl shipped into the United States. The 35% tax will apply to goods that are not covered by the USMCA trade pact and will be in addition to other sectoral tariffs—such as those on industrial metals. The EU can also expect a letter outlining the tariffs it could be subject to if it doesn’t reach an agreement by August 1. Friday’s flurry of tariffs seems like it could be the last straw for investors who have largely brushed off tariff threats since April. Investors and companies were quick to assume that Trump is usually willing to compromise on trade as long as some progress is being made. The move higher in stocks since May has continued because markets assumed that the eventual tariff baseline would be higher than before, but still at a manageable level. The developments of last week increase the risk that trade policy could derail economic growth and once again put markets under pressure.
Looking forward to this week, inflation will come into focus with the Consumer Price Index on Tuesday and the Producer Price Index on Wednesday. Various speakers from the Fed will be sprinkled throughout the week, and investors will keep an eye out for any clues on policy shifts in the second half of the year. Finally, the second-quarter earnings season will kick off with major banks getting things started.
| TIME (ET) |
REPORT |
PERIOD | MEDIAN FORECAST | PREVIOUS |
| MONDAY, JULY 14 | None scheduled | |||
| TUESDAY, JULY 15 | ||||
| 8:30 am | Consumer Price Index (CPI) y/y | June | 2.7% | 2.4% |
| 8:30 am | Core CPI y/y | June | 3.0% | 2.8% |
| 8:30 am | Empire State Manufacturing Survey | July | -9.0 | -16.0 |
| Various Federal Reserve Speakers | ||||
| WED., JULY 16 | ||||
| 8:30 am | Producer Price Index (PPI) | June | — | 2.6% |
| 8:30 am | Core PPI y/y | June | — | 2.7% |
| 9:15 am | Industrial Production | June | 0.1% | 0.2% |
| 9:15 pm | Capacity Utilization | June | 77.4% | 77.4% |
| 2:00 pm | Fed Beige Book Release | |||
| THURSDAY, JULY 17 | ||||
| 8:30 am | Initial Jobless Claims | July 5 | 233,000 | 227,000 |
| 8:30 am | U.S. Retail Sales | June | 0.2% | -0.9% |
| 8:30 am | Import Price Index | June | 0.3% | 0.0% |
| 8:30 am | Philadelphia Fed Manufacturing Survey | July | -0.3% | -4.0% |
| 10:00 am | Home Builder Confidence Index | July | 33 | 32 |
| Various Federal Reserve Speakers | ||||
| FRIDAY, JULY 18 | ||||
| 8:30 am | Housing Starts | June | 1.30M | 1.26M |
| 8:30 am | Building Permits | June | 1.39M | 1.39M |
| 10:00 am | Consumer Sentiment | July | 62.0 | 60.7 |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market