Why investors should stay in May
Financial Post - almost 4 years
The markets started May in pretty strong fashion, but it is no secret that the May-to-October period is traditionally the weakest six months of the year for equities.
Proponents of the “Sell in May and go away” trade seem to have the historical numbers on their side. Monthly data going back to 1928 shows the S&P 500′s average return between May and October is just 1.83%, while the index rises an average of 4.98% between November and April.
On top of that, the first year of a U.S. presidential cycle has also meant greater risk in the past. Yet the markets seem to be dismissing historical precedents. As a result, investors are keen to see what storyline gains credibility over the next eight weeks – the balance of the second quarter.
If U.S. economic data continues to tilt toward softer readings, thereby producing lower inflation expectations, demand for dividend-paying stocks will continue apace. But if we see higher capital spending and accelerating earnings, perhaps cyclical
Financial Post article