The Oldest Summer Trade on the Calendar | History Says Not So Fast

Every spring, the same question comes back.

Should I sell in May and go away?

Markets are closed today. The tape is quiet. That makes this the right moment to step back, before the noise returns tomorrow.

Five months in, 2026 has delivered more than most braced for. A Supreme Court ruling redrew the tariff map in February. A Middle East war redrew the energy map a week later. Q1 earnings then came in at the highest growth rate the index has reported since 2021, with a net profit margin that set an all-time record. The S&P sits near record highs heading into the holiday.

The posture heading into June is not euphoric. It is not broken. It is selective. And that word, selective, is the only lens that makes sense when oil, rates, and a tariff regime now being relitigated quarter by quarter carry more market votes than any almanac.

Investor Signal 

The first five months set the table for a summer defined by variables, not seasonality. Context is the edge. The calendar is the noise.

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The saying did not start on Wall Street.

It started in London's financial district in the 18th century. Every May, wealthy bankers and aristocrats left the city for the English countryside. Trading slowed. Capital went quiet. Then autumn arrived, and with it the St. Leger Stakes, one of Britain's most storied horse races, run each September in South Yorkshire.

It was not a strategy. It was a social calendar observation.

Wall Street inherited the saying, stripped the context, and turned behavior into gospel. Three centuries of repetition gave it the weight of empirical proof it never earned. The phrase predates electronic trading, global capital flows, and the Federal Reserve.

It described what wealthy traders did. Not what the market rewarded.

Investor Signal 

Knowing the origin strips the authority from the rhyme. The adage survived because the behavior it described was real, not because the strategy it implies is sound.

The pattern holds up. Research across 37 international markets from 1970 to 1998 found the effect in 36 of them, statistically significant in 20. It held out-of-sample through 2012. Since 1990, the S&P 500 has averaged roughly 3% from May through October versus 6-7% from November through April. Persistent. Real.

Here is what the headline conceals.

Summer markets still go up. Positive returns occur in roughly three of every four May-to-October windows.

The investor who sold every May and bought back every November turned $1,000 into $64,000 between 1975 and 2024. The investor who held turned that same $1,000 into $340,000.

The adage describes relative underperformance. It has been sold as an exit signal. That gap costs decades of compounding.

Investor Signal 

The pattern is persistent. The exit strategy is not. Investors who treat the adage as an exit signal trade compounding for the illusion of safety.

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The effect was dramatically stronger before 2000. From 1950 to 1999, the winter-summer gap ran nearly 13 percentage points, with higher returns and lower risk simultaneously. From 2000 to 2023, that gap narrowed to under 5 points. LPL's analysis of the last 12 years shows the May-October window averaging 5.1%, up from the 2.1% long-run figure since 1950.

More striking: the volatility profile has inverted.

Before 2000, summer months carried higher volatility than winter, exactly what the adage implied. Since 2000, summer months have been calmer. The winter period now carries more risk than the summer it warned you away from.

The trade-off has reversed. Most investors following the adage have not noticed.

Investor Signal 

The playbook was built for a world that no longer exists at the same scale. The pattern still shows up, but with smaller rewards and a risk profile that now cuts against the strategy.

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The macro setup for summer 2026 has three pressure points the adage was never built to absorb.

Energy is the loudest. Brent jumped from roughly $72 to nearly $120 between late February and mid-March before settling into a still-elevated range after the Iran ceasefire. The supply scars do not unwind on a press release timeline. What Q1 earnings revealed was more interesting than the price action: of the 117 S&P 500 companies that cited the Middle East and also issued full-year guidance, 88% raised or maintained it. The conflict was visible, widely discussed, and largely absorbed.

The tariff regime is in legal limbo. The Supreme Court struck down the IEEPA tariffs on February 20. The administration pivoted within hours to a 10% global tariff under Section 122 of the Trade Act of 1974. On May 7, the U.S. Court of International Trade ruled that one invalid as well, with an appeal in motion. Section 232 and Section 301 actions are still live. The trade environment is now a quarterly variable, not a settled cost structure.

Rates remain on hold. The Fed's June 16-17 meeting carries the next dot plot. Markets are pricing limited cuts in the near term as the energy shock works through inflation prints.

Investor Signal 

Oil sets the inflation backdrop. Courts set the tariff backdrop. The Fed responds to both. The Q1 takeaway is that corporates delivered through the disruption. Positioning for the actual environment carries a structural edge over positioning for a pattern.

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Q1 did not just clear the bar. It reset what the bar measures.

With 91% of the S&P 500 reported, the index posted its highest earnings growth rate since Q4 2021, its highest revenue growth rate since Q2 2022, and the highest net profit margin recorded since FactSet began tracking the metric in 2009. 84% of companies beat EPS estimates. The aggregate beat ran nearly 18% above expectations, more than twice the historical norm.

The raw scorecard understates what the season revealed.

The qualitative signal was sharper. Management teams across technology, utilities, industrials, and financial services were not describing market opportunity. They were reporting on obligations already incurred. Contracted gigawatts. Locked procurement schedules. Signed multi-year agreements. Capital plans already resized around named customer commitments.

When executives describe what they hope the market will do, they are expressing a view. When they describe what they have already signed, they are reporting a fact. Q1 2026 was weighted toward the latter.

The takeaway is that a structural track of the economy, AI infrastructure, power, cloud, industrial buildout, is now operating on contracted demand rather than projected demand. A second track, the rate- and tariff-sensitive cyclical economy, is operating under different conditions entirely. The two tracks do not converge in the next quarter.

Investor Signal 

Q1 did not raise the bar for Q2. It clarified what the bar is. The question is no longer whether demand exists. It is whether supply can keep up. Execution is everything.

If the data shows a pattern that is real but fading, and compounding punishes full exits, the response isn't leaving or ignoring. It is rotation.

Since 1990, defensive sectors like consumer staples and healthcare have led from May through October. Cyclicals like tech, industrials, and discretionary have led from November through April. That gap has held more consistently than overall market direction. Staples held in 2022 when rates reset. Healthcare carried in 2020 during volatility spikes. This pattern shows up when pressure builds.

Shifting toward defensives in weaker months keeps capital working while reducing exposure to growth shocks. Buy and hold still wins over time. The signal isn't when to exit. It's where to sit while staying invested.

The Rotation

Defensives hold the summer. Cyclicals lead the winter. No exit required. No market timing. No bet on whether a 300-year-old saying stays relevant.

The pattern is real. The case for a full exit is not.

Time in the market compounds. Calendar exits erode it. The years when summer dramatically outperformed, 2020, 2023, 2009, were exactly the years when the exit strategy felt most justified. April 2026, when the S&P put up its strongest monthly performance since 2020 with a war ongoing and the tariff regime in court, belongs on that list too.

The battlefield this summer is not whether the market goes up or down. It is whether the contracted demand reported in Q1 converts to delivered capacity in Q3 and Q4. That is a company-specific question. It is not a calendar question.

The question is not whether to sell. It is whether your positioning reflects the actual risks in front of you, not the ones a horse racing reference from 1776 predicted.

In a market this specific, generalities cost money.

This Memorial Day, we honor those who made the freedoms we exercise every day, including the freedom to participate in open markets, possible. We hope you have enjoyed the long weekend, and we will pick things back up here tomorrow.