“To sell, or not to sell: that is the question: Whether ’tis nobler in the mind to hold through a possible summer market sell-off hoping for higher prices, or to take action early against possible losses, and by selling protect capital?”
With apologies to Shakespeare fans around the world for the creative license, the important point from the above revision is the question on the minds of many investors of our time; should I “sell in May and go away?” While stock markets were not in existence during Shakespeare’s lifetime, if he were alive today he might be pondering that famous Wall Street axiom and its application on his personal investments.
What about you? Are you pondering that? Let’s see where we are.
The stock market is still in a “yellow” light warning condition and under a sell signal, however, it is only a first stage sell-signal out of a possible 3 stages. In plain talk, market conditions have improved since early April but are not yet fully in gear.
Small & mid-sized growth companies, oil & gas companies & regional banks have been performing very well this year, while utilities, tech, health care & REITs have had a bumpy ride. So, this looks more like a market undergoing rotation than it does the start of a bear market.
However, Distribution Days (days of professional selling) have become more numerous lately raising some concern about the markets near term future, and interest rates have risen to levels not seen in years causing portfolio managers to rethink their optimistic future earnings projections.
Keep in mind, the economic back drop in the US is the strongest it has been in 11 years. While that is great news, it brings with it natural the headwinds of higher interest rates, rising inflation and tougher earnings comparisons.
So, sell in May & go away? While the outlook remains rosy and challenges continue to mount, the trend – for now – remains up. As a result, we increased the stock exposure in our equity portfolios and eliminated the inverse positions over the past few weeks. Whether stocks improve and our signal goes “green”, or the markets begin to slip lower and we move to a “red” light, we will continue to intently monitor the daily internals of the market for our clients and will work diligently to stay on the right side of the next major trend by waiting for and following the markets lead. Have a Triumphant day! ®