Every year, someone trots out the old “Sell in May and go away” adage. Most years, the market ignores it. But 2026 might be different — and there’s data to back that up.
MarketWatch’s Mark Hulbert points out that the “Halloween indicator” — the strategy of holding stocks only from November through April — has historically outperformed during midterm election years. This is one of those years. The combination of a seasonal weak period (May through October) overlapping with midterm election uncertainty creates a historically choppy environment for equities.
Here’s the twist: you don’t actually have to go to cash. The smarter play may be rotating into defensive sectors — think utilities, consumer staples, healthcare — rather than sitting on the sidelines entirely. Defensive ETFs like XLU, XLP, and XLV tend to hold up better during the “weak” seasonal window while still keeping you invested and positioned for the fall rally that often follows midterms.
The case for acting now is stronger than usual. Markets are already jittery from the Iran conflict and oil prices north of $100/barrel. Inflation fears are creeping back. The Fed is on hold. Add midterm noise starting to ramp up, and you’ve got a recipe for a bumpy summer. Meanwhile, valuations in defensives are actually reasonable relative to the broader market after months of underperformance.
This isn’t a call to panic-sell. It’s a nudge to think about where you’d rather be sitting if August gets ugly. History suggests the answer is probably not in high-beta tech names.
