Around the end of April, a certain type of investor begins to feel anxious. You can practically picture the type: reading the headlines while sipping coffee in the morning, watching valuation metrics rise on a second monitor, and slowly nodding in agreement with whatever financial pundit has just hinted that it may be time to move away from the security of cash for the summer. There is a certain gravitational pull to the proverb. “Sell in May and go away.” It has been repeated for decades, passed down between traders like a piece of traditional knowledge that seems too timeless to be contested. One of the most significant financial errors a retail investor makes in 2026 might be trusting their gut.
The “Sell in May” maxim originated in a different world. It came about as a result of decades in which equity markets roughly followed a seasonal rhythm, summer trading volumes were low, and institutional investors traveled to the Hamptons. Technically speaking, that world still exists; low-volume summer markets are still a real phenomenon, and The Economist noted this year that small changes in thin markets can result in excessive price swings. However, history has repeatedly tested and rejected the notion that an investor can forecast the direction of those swings or that stepping out in early May and stepping back in around October is a dependable route to better returns. There is no calendar observed by markets. They keep an eye on things.
| The Adage Origin | “Sell in May and go away” —decades-old seasonal strategy suggesting weaker May–Oct stock returns |
| 2026 Macro Pressure Points | Iran war squeezing oil supply via Strait of Hormuz; sticky inflation; rising gas/coffee/milk prices |
| Dollar Risk (The Economist, Feb 2026) | Falling US dollar described as “treacherous” — those holding American assets face growing currency headwinds |
| Valuation Warning Signals | US CAPE ratio and Buffett Indicator both elevated; S&P 500 and ASX 200 near multi-year highs entering 2026 |
| Panic Selling Risk (Motley Fool, 2026) | Missing only a handful of the market’s best days can dramatically reduce long-term returns |
| Retail Investor Behavior Warning | Bloomberg: most retail investors underperform the market; prediction market bets collapse in downturns |
| Buffett’s Core Principle | “Volatility is not risk — permanent capital loss is.” Holds through every market environment. |
| Historical Pattern Problem | Expensive markets can stay elevated for years; US market ran hot through most of the late 1990s |
| 2026 Trade War Risk | Low-volume summer markets amplify volatility from tariff and geopolitical developments (Money Morning) |
| Reference / Research | bloomberg.com/opinion — Bloomberg Markets & Economics Commentary |
2026’s circumstances are truly unique, and not in a way that makes timing simple. The conflict with Iran has been obstructing the Strait of Hormuz, reducing the world’s supply of oil, and driving up gas prices in ways that affect almost every other expense in the economy, including consumer goods, transportation, and food production. In February, The Economist called the dollar “treacherous,” posing the unsettling question of what will happen to investors who own assets denominated in dollars as currency headwinds increase. The issue of inflation is still unresolved. Expectations for interest rates are rising once more. In light of this, both the US CAPE ratio and the Buffett Indicator are warning of stretched valuations. On paper, this appears to be exactly the kind of situation where a cautious investor might decide to pull out.
And yet. The issue with that reasoning is that it has been used in numerous previous contexts with a similar level of conviction, and it has frequently cost investors more money than it has saved them. By conventional standards, the US market appeared pricey for a large portion of the late 1990s, and investors who left due to concerns about valuation missed some of the most important compounding years in the history of the modern market. The main question is whether an investor’s exit and re-entry timing will be preferable to just staying invested through the volatility, rather than whether the concerns are legitimate, which many of them are. That assumption does not fare well in history. According to research, long-term returns can be greatly decreased by missing even a small number of the market’s strongest single days, which frequently happen randomly during times of high volatility. When sentiment is at its lowest, recovery days tend to be the strongest.
Examining the market’s current emotional texture is also worthwhile. Observing financial media in the spring of 2026 gives the impression that many people are already preparing for a summer correction. On forums, retail investors are discussing it. YouTube commentators are posting videos with titles like “The 2026 Stock Market Crash Has Started.” When a real downturn occurs, Bloomberg has observed the risk that permeates high-risk retail portfolios. Because markets typically price in what is widely anticipated, a thesis about a market decline takes on an odd quality when it becomes so widely held and publicly circulated. Surprises that weren’t part of the consensus script are typically the ones that cause markets to move dramatically.
When fear and a well-known proverb come together, “Sell in May” can subtly turn into panic selling, which usually causes harm in two different ways. Convinced that prices cannot sustain their current levels, the first version sells as they rise, then watches from the sidelines as they continue to rise. Selling during a downturn and locking in losses at the precise moment when quality companies are becoming genuinely cheaper is the second, more damaging version, which misses the potentially steepest early stages of a recovery. For decades, Warren Buffett has maintained that investors should be afraid of permanent capital loss and that volatility is not the same as risk. A risk has been taken by a portfolio that is sold in May and remains in cash while the market does something unexpected in either direction. However, this risk is not the kind that neatly appears on a volatility chart.
Investors should undoubtedly be carefully considering what they own and why because the 2026 environment is sufficiently unsettling. Examining pricey markets with reduced error margins is worthwhile. Even more attention should be paid to positions based on leverage or speculative momentum. However, there is a significant distinction between the reflexive seasonal impulse to simply exit due to the month and that type of intentional portfolio review. Investing is the former. The latter is more akin to superstition disguised in the language of strategy, and in a year with so many unpredictable variables, acting on superstition might be more costly than most people sitting anxiously with their finger on the sell button are currently accounting for.