It’s that time of year again when investors are replaying that old market aphorism: “Sell in May and go away.” However, stock exchange traded fund should take that saying with a grain of salt.
ConvergEx Group’s chief market strategist, Nicholas Colas argues that selling in May and coming back to equities in November is not an investable thesis, reports Alex Rosenberg for CNBC.
“You can’t just close your eyes and use a nursery rhyme to invest,” Colas said in the article. “You have to look at why it might be similar or different this year. We respect history, but everything about this market over the past five years has been a series of interesting and one-off anomalies—the most obvious example of which is Fed policy.”
Over the past 36 years, the S&P 500 has gained an average 1.3% per month between November to April. However, the index only gained an average 0.3% per month between May to October. The numbers, though, don’t mirror results in the last few years.
“A lot of people like to talk about making that one-month call in May or whatever, but if you bought securities anytime last May, you’d be well above that level today,” Adam Parker, Morgan Stanley’s chief U.S. equity strategist, said in the article. “So I don’t really know why people make that statement—you can’t statistically prove that it works every time. It’s a bit astrological.”
Moreover, Citigroup Chief U.S. Equity Strategist Tobias Levkovich points out that economic data points to better conditions.