The hypothesis is that equities tend to underperform in the six months through October, so investors should sell stocks at the start of May, invest in cash and then re-enter the market in late autumn, the strategists said.
“In the U.S., a stay invested strategy has tended to outperform, particularly in recent years,” the strategists said.
The technology sector now accounts for 27% of the S&P 500, or much higher than the 8% weighting for the MSCI Europe index, according to UBS.
Over the past 15 years, returns in Europe have been negative in June 80% of the time, according to the report.
The S&P 500 rose to a record 4,211.47 finish on April 29, for example, and was up 11.3% this year as of Friday’s close.
“We are now entering a time of year when stocks have historically found it more challenging to advance,” according to the UBS report.
Ryan Detrick, chief market strategist for LPL Financial, said in a blog Friday that the six months from May through October have been “some of the weakest months of the year for stocks” in the past 10 years.