LIVE MARKETS-Calm before the storm? Seasonal weakness meets compressed volatility 

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CALM BEFORE THE STORM? SEASONAL WEAKNESS MEETS COMPRESSED VOLATILITY

“Sell in May and go away” is one of Wall Street’s oldest market sayings. The idea is simple: sell your stocks around May 1, sit out the summer months, and then return to the market around Halloween, or November 1.

The catch? The data suggests it’s far from a foolproof strategy.

According to LSEG data, the S&P 500 gained an average of 2.1% between April 30 and October 31 from 1950 through 2025, with a median return of 2.7%. By comparison, the index rose an average of 6.9% from October 31 through April 30, 2026, with a median gain of 6.2%.

While the November-to-April period has historically delivered stronger returns, stocks have still finished higher during the May-to-October stretch in 51 years, compared with declines in 26 years. Put another way, “Sell in May” has only really worked about one-third of the time. The most recent example came in 2022, when stocks fell during a bear market that began in January and bottomed in October.

This year is another reminder that seasonality is no guarantee. Since April 30, the S&P 500 has gained about 3.3%, even though the benchmark is down roughly 1.3% so far in July, a month that has historically been one of the market’s stronger months.

Still, investors are about to enter what has traditionally been a weaker stretch for stocks.

The chart below shows the S&P 500’s average monthly returns from January 1950 through this month. August has been the weakest positive month, with an average gain of just 0.04%. September has been the clear laggard, posting an average decline of 0.63% and ranking as the market’s worst month on average.

Yet one factor may be worth watching beyond the calendar. The S&P 500's daily volatility has remained unusually subdued, even as investors grapple with geopolitical tensions, tariffs, earnings and Fed uncertainty.

Again, seasonality is no guarantee. But with the S&P 500's daily volatility remaining unusually compressed, a larger move — in one direction or the other — may be just around the corner.

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)