Sell in May and go away? Better not!
Article by Carsten Klude
The saying "Sell in May and go away" goes back to the observation that stock markets tend to perform worse in the summer months. The idea is that investors sell their equity holdings in May and get out of the market by the fall, i.e. by the end of September or early October. This strategy is based on historical price movements, which show that returns are often lower in the summer months than in the other months of the year. However, neither the seasonal patterns nor the theories that are supposed to explain them are really convincing. Our research shows that the "Sell in May" strategy definitely does not guarantee success.
May 2024 has been a very good month for equities so far. Most indices have gained between three and seven percent, more than offsetting the price losses from April. The reason for this is the positive environment. The reporting season for the first quarter has shown that most companies have generated better than expected profits. The large US technology companies in particular have once again proved to be real money-printing machines. The higher profits are being used by US companies in particular to accelerate the buyback of their own shares. A simple conclusion can be drawn from this for investors: If those who know their company best are buying its shares, why not do the same?
The outlook for the DAX remains good. The reporting season has been so positive that corporate analysts have revised their earnings expectations for 2024 upwards. Despite the good share price performance this year, the DAX is still quite cheaply valued with a P/E ratio of 12.5, meaning that our recently raised year-end target of 19,500 points could soon be reached. What could happen after that? Assuming that the economy recovers somewhat, the inflation rate declines and interest rates fall slightly, the DAX could rise to over 22,000 points by the end of 2025. If there are no major crises, the index could even rise to around 30,000 points by 2030. For the S&P 500, this would mean analogous price targets of 6,200 points by the end of 2025 and just under 10,000 points by 2030. In other words: Stay invested!