The stock market’s famous “Sell in May and Go Away” strategy is losing its edge, raising the question of whether investors should hedge seasonal weakness rather than exit equities altogether.
The Halloween indicator, which favors holding stocks from November through April, has historically delivered stronger returns. But that gap has largely disappeared. According to Yahoo Finance, the S&P 500 averaged gains of 6.8% during November–April and 6.9% during May–October over the past decade. The summer stretch also gained about 23% in 2025.
With the seasonal advantage fading, investors could consider ETFs that seek to reduce equity volatility, provide defensive exposure or diversify portfolio risks.
5 ETFs to Watch If Summer Volatility Returns
1. iShares MSCI USA Min Vol Factor ETF (BATS:USMV)
USMV targets U.S. stocks with lower volatility characteristics than the broader equity market. Its rules-based approach offers investors a way to maintain equity exposure while seeking a smoother ride during market turbulence. However, lower volatility does not guarantee smaller losses in every downturn.
2. iShares MSCI USA Quality Factor ETF (BATS:QUAL)
QUAL focuses on U.S. companies with stronger quality characteristics relative to peers in their respective sectors. Companies with robust profitability and balance sheets may be better positioned to weather economic uncertainty, although quality stocks can still decline sharply during broad market selloffs.
3. State Street Consumer Staples Select Sector SPDR ETF (NYSE:XLP)
XLP provides exposure to consumer staples companies spanning food, beverages, household products and personal care. Demand for these everyday products can be more resilient during economic slowdowns, making the fund a potential defensive allocation. But sector concentration and valuation risks remain.
4. iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY)
Investors seeking diversification beyond equities could consider SHY, which tracks short-term U.S. Treasury securities. Its relatively short duration generally makes it less sensitive to interest-rate changes than long-duration bond ETFs, although its price can still fluctuate.
5. AGF U.S. Market Neutral Anti-Beta Fund (NYSE:BTAL)
For a more tactical approach, BTAL seeks to benefit from the relative performance of lower-beta stocks over higher-beta stocks through long and short equity positions. It is not a conventional market hedge and can lose money when its strategy moves against it.
Should Investors Sell in May?
History offers reasons for caution, not a reliable trading signal. The S&P 500 suffered losses of about 15% during May–October 2001, 18% in 2002 and 30% in 2008, according to Yahoo Finance. Yet strong summer rallies have also rewarded investors who remained invested.
Rather than betting on a calendar pattern, investors could compare defensive ETFs with the State Street SPDR S&P 500 ETF Trust (NYSE:SPY) across historical May–October periods, measuring total returns, maximum drawdowns and volatility.
Hedging seasonal weakness may be more practical than abandoning the market. No ETF guarantees protection, and a defensive allocation can underperform when equities rally. Investors should weigh costs, taxes, risk tolerance and time horizons before changing their portfolios.
Photo: Vikki Kh / Shutterstock
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