We have officially entered what is known as the "seasonally weak" six-month period of the market, from May 1 through October 31. You may want to review your seasonal strategies and consider a bit more of a defensive tilt to your portfolio for the next several months.

It’s that time of year when I remind you of the market’s well-documented history of annual seasonality. "Sell in May and Go Away" is a famous piece of Wall Street folklore.

It’s been proven beyond doubt that the market tends to make most of its gains in the winter months between November and May. Over the past 50 years, the Dow on average has produced a gain of almost 7% during the winter months (strongest-period) and just over 1% during the summer months (weakest-period). 

For the just ending "strongest-period", the S&P 500 Index was up 5.88%, even with the brutal November and December selloff of 2018. So, despite a -15% decline to start the strongest six month period, the market rallied +21% to achieve the nearly 6% gain for the period. 

As we enter May and the weakest six month period, it makes sense to prepare for the possibility of the stock market throwing us a curveball, especially with investor optimism at such lofty levels. Stocks seem to be floating on air over the last several weeks. When sentiment is so bullish, even the slightest negative surprise can send the stock market lower, and fast.

Rather than selling stocks in May and holding bonds or cash until November, we would recommend a much more sophisticated strategy. We want to own stocks, but in the sectors that have a history of outperformance over the summer months. 

According to Dorsey Wright & Associates (DWA), many specific sectors tend to experience losses during the seasonally weak six months of the year, with semiconductors, oil service, and steel producing the worst median returns over the study period. In contrast, the internet, software, and biomedics sectors have historically produced the best median returns of the 40 sectors that DWA follows during the seasonally weak period.

Bottom Line - Most of the market's gains occur during the November through April time frame while stocks tend to drift sideways to lower and are more prone to significant corrections during May through October. Make your adjustments accordingly.

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George Kiraly Jr., CFP®, MBA is a NAPFA-Registered Financial Advisor.

Disclosure: George Kiraly Jr., CFP®, MBA is the Founder & Chief Investment Officer of LodeStar Advisory Group, LLC, an independent Registered Investment Adviser located in Short Hills, New Jersey. George Kiraly, LodeStar Advisory Group, and/or its clients may hold positions in the ETFs, mutual funds and/or any investment asset mentioned above. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. The above commentary does not constitute individual investment advice. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.

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