'Sell in May' stock market strategy hasn't really worked since 1980

  • The period between May and October underperformed the other half of the year, but still provided consistent gains.
  • The S&P gained 1.9 percent in the spring/summer period, vs. an average return of 6.8 percent in the fall/winter period.

Adam Jeffery | CNBC

By now you've probably heard the old market adage, "sell in May and go away", at least a dozen times. But is there any truth to it? Using hedge fund analytics tool Kensho, CNBC compared the market's performance from May through October with the returns from the other half of the year.

The strategy refers to a seasonal trading approach where an investor will cash out of equity holdings in May, staying in cash until Halloween, a period which historically sees a jump in volatility, and gets back into the market in November.

Since 1980, however, the rhyming maxim has not really played out.

While it is true the period from May through October underperformed the remainder of the year, on average, but if you implemented the strategy, you would have missed out on some upside.

From May through October the S&P 500 logged an average gain of 1.9 percent, trading positively 68 percent of the time. The Dow rose 1 percent, trading positively 62 percent of the time. The Nasdaq was the top performer of the three during this period, gaining 2.7 percent and trading positively 66 percent of the time. When compounded over a longer period, these gains can add up to significant returns.

Now, those returns significantly underperform the period from November through April. The S&P 500 gained an average of 6.8 percent, trading positively 79 percent of the time. The Dow was the most consistent performer of the three, trading positively 86 percent of the time, while logging an average gain of 7.9 percent. The Nasdaq once again lead on average returns, gaining 8 percent, while trading positively 71 percent of the time.

Disclosure: NBCUniversal was a minority investor in Kensho prior to the firm being acquired by S&P.