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“Sell in May and go away” is a popular saying on Wall Street based on the S&P 500’s historical underperformance from May through October. With a host of uncertainties fuelling fears of a global slowdown, this could be one of the years when the adage holds true.

Since many investors take time off during the summer, there tends to be lower trading volume and less appetite for stocks during the period. Lower participation can also increase volatility, strategists say.

Added to the summer effect this year are an escalating trade war between the United States and China, U.S.-Iran tensions and uncertainty over Britain’s exit from the European Union.

There’s also the stock rally in the first four months of this year. After surging 17.5 per cent January through April, the benchmark S&P index reversed course in May as hopes for a U.S.-China trade deal faded on pledges of more tariffs from U.S. President Donald Trump.

With one trading day left in the month, the S&P 500 had declined 5.3 per cent, in what will be its first May decline since 2012.

“The fact we had a big first four months and May has been weak tells us the market is behaving very close to seasonal historical patterns,” said Jeffrey Hirsch, editor-in-chief of the Stock Trader’s Almanac, a handbook for investors. Mr. Hirsch says the S&P could see a slight rebound in June, but he expects weakness from July through October.

The May-October period has shown an average 1.4-per-cent gain for the S&P 500 compared with a 7.1-per-cent gain between November and April going back to 1950. And in that time frame, the S&P’s performance was stronger from November to April than May to October 65 per cent of the time, according to data from Mr. Hirsch.

He pointed to 44 S&P declines between May and October compared with 15 declines between November and April since 1950. The previous S&P May-through-October decline was in 2015.

A big decline in May doesn’t necessarily point to big losses in the summer, however, according to Bespoke Investment Strategist co-founder Paul Hickey.

Bespoke’s data show that if an investor bought the S&P 500 index at the start of November and sold at the end of April every year starting in 1928, they would have seen a 4,661.6-per-cent gain by April 30, 2019, against a gain of 185 per cent in the May-October period.

The difference starting in 1945 is even more dramatic, according to Mr. Hickey, with a 8,670.8-per-cent gain for November to April compared with 101.5 per cent for May to October.

(GRAPHIC - May-October S&P 500 historic gains lag far behind November to April, click https://tmsnrt.rs/2WsxbBG)

Sam Stovall, chief investment strategist at CFRA, is hoping for a “reflex rally” in June but expects stocks to “trade sideways or lower” in the third quarter.

“Trade discord could be the catalyst for why the third quarter is weak,” said Mr. Stovall. “A lot of people are worried it could throw us into global economic softness if not outright recession.”

This year, many investors say that concerns about the tit-for-tat U.S.-China trade tariffs will put far greater weight on stock markets than the typical seasonal pressures.

“The path of least resistance is likely lower for a while because we think the trade war will go on for some time,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, Tex. “But when you have an overwhelming macro-economic influence like a trade war or a recession, that’s going to overwhelm seasonal patterns.”

After May’s sell-off, investors are laser-focused on trade and any clues on the Federal Reserve’s interest rate policy, said Kristina Hooper, chief global market strategist at Invesco in New York.

“Whether investors go away for the rest of the summer has a lot to do with two factors: trade news flow and what the Fed does,” Mr. Hooper said.

Since the S&P rose so much in the first four months, Ryan Detrick, senior market strategist at LPL Financial in Charlotte, N.C., is betting that monthly declines will continue.

In the four years out of the last 50 that the S&P has dropped by more than 5 per cent in May, it also dropped that amount twice in June, he said.

“We’re not out of the woods in terms of market weakness. Investors should still be on heightened alert for more of a pullback,” Mr. Detrick said.

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