The traditional Wall Street adage of 'sell in May and go away' may prove costly this year as investors weigh whether to abandon a powerful market recovery heading into a historically turbulent stretch. According to The Economic Times, the S&P 500 has already staged a dramatic comeback, recovering a near-10% decline in just 11 trading sessions after a selloff triggered by disruptions to global oil supplies. While the S&P 500 Index's long-term performance for the May-October period shows a lackluster 2% gain going back to 1945, the performance in the last decade has been more robust at 7%, including last year's 22.1% rise. However, recent data shows the seasonal pattern has clearly frayed - the six-month stretch has posted double-digit gains in four of the past six years, with the S&P 500 rising over 20% during the 'Sell in May' period last year alone.
The artificial intelligence infrastructure boom is providing a powerful counterbalance to traditional seasonal concerns, offering quantifiable alpha through a projected 25% CAGR growth from the AI software market. As reported by The Economic Times, stocks have recovered strongly from a sharp selloff as worries about a massive escalation in the U.S.-Iran conflict eased. Advanced Micro Devices (AMD) exemplifies this momentum, with shares rocketing over 59% in April, backed by strong fundamentals including healthy demand for server and client processors. The AI infrastructure boom extends beyond headline chipmakers, with TTM Technologies seeing its data center computing segment grow 57% year-over-year in late 2025, while the AI software market is forecast to expand from $122 billion in 2024 to an estimated $467 billion by 2030. Ryan Detrick, chief market strategist at Carson Group, noted that 'You hate to say to ignore 'sell in May, go away' ... but it hasn't worked at all in the last decade'.
Despite strong momentum from AI growth, strategists caution about one important consideration that argues for caution about abandoning the sell-in-May strategy. According to The Economic Times, 2026 is a midterm election year, when U.S. voters elect members of Congress. In five of the last 10 midterm years, the S&P 500 declined May through October, with an average loss of about 1.5%. Additionally, looming over the outlook is the unresolved U.S.-Iran conflict and its potential drag on global growth. Investors also have to contend with a new Federal Reserve chair as Kevin Warsh is expected to replace Jerome Powell at a time when analysts expect a bumpier rates path ahead. The current risk backdrop introduces additional complexity, with record stock prices, oil hovering near $100 a barrel, and souring consumer sentiment creating a volatile mix that challenges the core premise of the seasonal thesis.
For portfolio managers navigating this complex environment, the strategy must balance AI-driven alpha with seasonal considerations through risk-adjusted allocation of 70% AI exposure, 20% core equities, and 10% hedging against oil/geopolitical shocks. When the S&P 500 enters May near all-time highs, historical averages show a return of 6.1% over the next six months with positive outcomes in 85% of cases, suggesting that starting valuation matters more than the month. Key catalysts include AMD's Q1 earnings report on May 5, with management guiding for $9.8 billion in revenue (32% YoY increase), Federal Reserve policy shifts, and geopolitical developments around the Strait of Hormuz blockade. The disciplined approach involves monitoring forward-looking events rather than calendar rules, with strong earnings and dovish Fed signals supporting core AI positions while geopolitical flare-ups or growth scares could necessitate tactical shifts through pre-constructed hedges.
