MW These stocks and ETFs can beat the 'sell in May' slump - and dodge the 2026 midterm blues
By Mark Hulbert
You don't have to exit the market to survive a summer lull. Here's your 'stay and play' strategy for the 2026 election cycle.
Instead of going to cash, shift your stock portfolio into the most defensive sectors.
Following the old Wall Street adage to "Sell in May" and get back into stocks in October makes sense this year especially. This six-months-on, six-months-off seasonal strategy exploits the "Halloween indicator" - which has been successful in U.S. midterm election years like this one.
The traditional way of exploiting this pattern is to go to cash in the so-called "summer" months - from May 1 until Oct. 31. But there is an alternate strategy which also has shown promise historically: Instead of going to cash, shift your stock portfolio into the most defensive sectors.
Those who recommend this alternative don't deny that the stock market tends to be a below-average performer during midterm-year summers. But, they point out, over that time the market's defensive sectors still outperform a money-market fund, on average. As a result, market-timing investors are likely to make more money by "staying and playing" rather than "selling and going away."
One analyst who recommends this alternate approach is Sam Stovall, chief investment strategist at CFRA Research. A number of years ago he created the CFRA-Stovall Large Cap Seasonal Rotation Index, which is equally divided in the summer months between the S&P 500's SPX defensive sectors (consumer staples and healthcare) and in the winter months between its more aggressive sectors (consumer discretionary, industrials, information technology and materials). Since 1990, which is how far back data for this index exists, the strategy has produced an average gain of 0.8% during midterm years versus 0.2% for 90-day T-Bills BX:TMUBMUSD03M.
The statistical significance of this result is weak, since there have only been nine midterm years since 1990. But a 2009 research paper, "The Halloween Effect in U.S. Sectors," analyzed a similar seasonal sector-rotation strategy going back to 1926 and reached a similar conclusion.
Perhaps the easiest way to exploit this strategy is to invest in an exchange-traded fund that is benchmarked to the CFRA-Stovall Large Cap Seasonal Rotation Index - the Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF SZNE. Note, however, that this ETF charges a 0.60% expense ratio, and you can replicate the strategy yourself by investing in the corresponding sector funds.
For that, consider the low expense ratio - just 0.08% - of the two ETFs that correspond to the two defensive sectors that SZNE invests in during the summer months - the Consumer Staples Select Sector SPDR ETF XLP and the Health Care Select Sector SPDR ETF XLV.
Another option for the next six months is to shift your portfolio into individual stocks in those two defensive sectors. Below is a list of seven stocks in the consumer staples and healthcare sectors that are currently recommended for purchase by at least two of the investment newsletters monitored by my performance auditing firm.
Stock Ticker Sector Industry Abbott Labs Healthcare Healthcare equipment & supplies Alphabet GOOGL Communication services Interactive media & services Brown Forman BF.B Consumer staples Beverages Walt Disney Co. DIS Communication services Entertainment Meta Platforms META Communication services Interactive media & services Molson Coors Beverage Co. TAP Consumer staples Beverages Omnicom Group OMC Communication services Media
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
Plus: If you've ever been tempted to 'sell in May and go away' - now is the time
Also read: 15 stocks to put on your list to buy as the market recovers
-Mark Hulbert
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April 18, 2026 15:14 ET (19:14 GMT)
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