Prismo Metals Inc. (CSE:PRIZ)
A leadership team with a proven ability to explore, operate and develop precious metal discoveries.
Every May, Wall Street echoes the century old adage: “Sell in May and go away.” The saying originated in 19th-century London, when wealthy financiers would leave the sweltering city for summer holidays in the countryside, causing trading volumes to drop, markets to stagnate or drift lower, until they returned for the St. Leger Stakes in September. However, times have changed, and today’s investors no longer even consider “sell in May” as a meaningful reference for decision making.
The past 20 years of U.S. stock market performance clearly reveal that August and September are indeed weaker months – the S&P 500 averaged a gain of just 0.05% in August and -0.67% in September, with positive returns only about half the time. But July has actually been the market’s best-performing month over the past 20 years, rising 2.54% on average – outperforming November and April.
Small Caps Are Ushering in a “Summer Offensive” This Year
More critically, a noticeable shift in market style is underway. Over the past year, the large cap heavy S&P 500 has risen about 23%, while the small cap Russell 2000 index has gained 31%. Year-to-date through mid-May 2026, the Russell 2000 is up 11%, also outpacing the S&P 500’s 7.7%. In other words, small caps have quietly taken the lead.
The logic behind small cap strength is very clear. Small cap businesses are predominantly domestic, making them largely immune to currency fluctuations, geopolitical risks, and overseas economic slowdowns. With the U.S. economy still growing, small caps are the most sensitive to domestic demand and benefit most directly.
Valuation and Seasonality Double Tailwinds
More notably, even after this rally, small caps remain relatively cheap. Currently, the total market cap of Russell 2000 constituents accounts for only 4.6% of the total market cap of the Russell 3000, well below the historical average of 7.6%. The valuation gap between small caps and large caps remains significant, implying further room for convergence.
Looking at seasonality, July is also the second strongest month for small caps – with an average return of 2.36% over the past 20 years, behind only one winter month. As top fund managers head to the Hamptons or Europe for vacation, market trading may be left to the “B team,” but that precisely creates a window for investors who position in small caps early.
Conclusion
“Sell in May” is a relic of the industrial era, no longer applicable in today’s highly electronic and globalized market. This summer, capital is rotating from large-cap tech stocks toward smaller, more domestically focused small caps with real earnings growth. For investors, ignoring this old adage and carefully examining the structural opportunities in small caps may be the wiser choice.
