Wednesday, April 30, 2014

To Sell In May Or Not

As we noted in a post over the weekend, the "sell in May" seasonality phenomenon obviously enjoys a lot of press at this time of the year. As the below chart shows, the May to October period tends to be a flat to slightly up period for the equity market. Investors should ask themselves if selling out of stocks in May risks them not being in the market when the seasonally strong period begins in November. In other words, will investors implement the appropriate timing trade to re-enter the market. The second chart below is from the blog of the Stock Trader's Almanac and shows the 6th year of a presidential term tends to be a strong one. Granted, the data set of six year terms is not a large one. Following is Chart of the Day's commentary on this seasonal technical indicator.
"The stock market is about to enter what has historically been the weakest half of the year. Today's chart illustrates that investing in the S&P 500 during the six months of November through and including April accounted for the vast majority of S&P 500 gains since 1950 (see blue line). While the May through October period has seen mild gains during major bull markets (i.e. 1950-56 & 1982-97), the overall subpar performance during the months of May through October is noteworthy. Hence the saying, 'sell in May and walk away.'"
From The Blog of HORAN Capital Advisors

From The Blog of HORAN Capital Advisors

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