"Sell in May and go away" is an adage that stock traders use to reference how poorly stocks can do in the summer months. There isn't one specific stock that does poorly in the summer, because performance can vary greatly from year to year. Instead, look at general patterns for stocks and, based on that pattern, decide on an overall strategy.
Stocks for retail companies tend to not do as well in the summer because consumers focus most of their spending on the holidays, like Christmas time. Stocks related to vacation-themed companies may still see gains in the summer, but anything tied to retail purchases may see a drop. Many businesses report budget flushes in fall and winter, meaning they have to boost spending to keep up with holiday purchase demand. Naturally, this often comes back down during the summer.
In general, the stock market can be dull during the summer. Many people are vacationing and, often, folks just don't want to take a great deal of risk during months when they'd rather be relaxing. Many investors, notes an Optionetics website article posted on May 28, 2013, realize that most of their stocks won't move much during the summer months.
Although unpredictable, certain categories of stocks besides retail tend to do poorly in the summer. Stocks from companies focused on financials, as well as stocks from companies focused on industrials, tend to slump in the summer, according to Seeking Alpha's 10-year review of summer stock performance published in July 2013. Utilities tend to do well in the summer, possibly in part because of the greater need for utilities as the temperatures rise.
Although some stocks tend to not do as well in the summer, this isn't a tried-and-true rule that you can depend on. For example, in the summers of 2006 and 2007, the S&P 500 rose by 5 percent. In the summer of 2003, it rose by 13 percent. Trying to predict the market is tough, even for financial analysts. Just because the summer has been bad recently doesn't mean it'll stay that way.
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