Executive Edge

The best-performing sector of the market to own during the slow summer months

The best sector to hold stocks in during the summer
Key Points
  • Investors racked up huge gains in the first quarter of 2019 with the S&P 500 up 13%.
  • The stock market rally has continued into April, but the Wall Street mantra "Sell in May and go away" is in the minds of investors.
  • One sector has a long history — dating back to 1990 — of outperforming the market during the summer.

With April coming to a close, some investors are already starting to trot out the old Wall Street adage "Sell in May and go away."

The idea is that gains are generally worse in the summer months versus the rest of the year.

But if history is any guide, it's probably best not to sell everything.

Case in point: consumer staples.

Since 1990, it has been the most consistently positive sector from May through October, according to a CNBC analysis of Kensho, a machine-learning tool used by Wall Street banks and hedge funds to analyze trading scenarios.

Consumer staples have posted an average return of more than 4% and traded higher 79% of the time during the summer months over the past three decades.

Don't Sell in May and Go Away

The sector has surged alongside the market, with the Consumer Staples Select Sector SPDR Fund, widely known by its ticker, XLP, hitting a new 52-week high on Monday, a more than 18% climb from its lows in December, fueled by stronger-than-expected quarterly earnings from industry giants including Procter & Gamble and Coca-Cola — which account for more than 25% of the XLP.

The sector had underperformed the S&P 500 and all but two S&P sectors year-to-date, through April 23. Consumer staples have gained more than 12% this year, versus an S&P 500 return above 17%. Only utilities (9%) and health care (1%) have done worse in 2019.