TGIF May 2, 2014

May is here and spring is in full bloom.  The economy keeps chugging along.  Tax time is over.  Summer is just around the corner.  School will soon be out so Americans will start hitting the road soon.  The travel bug is biting.  It’s getting warmer.  Baseball is in full swing with both our local teams in first place.

Spring is also the time that when Wall Streeters begin crying:  “Sell in May and Go Away”.  Since 1928, May to October has been the weakest 6-month period for the stocks.  Conversely, November through April is the strongest.  Many Market tops have been formed in May and bottoms in October.

Because 2014 is the Mid-term election year of the Presidential Cycle, it behooves us to mention the stock market history during such a year:  An early 2nd Quarter peak ahead of a late 3Q low. That speaks to the Sell in May and Go Away adage.  The weakest 6-month period for the Mid-term year is usually April-September with an average decline of 2.2%. The strongest 6-month period has been October-March with an average gain of 12.5%, and average forward returns for the 6-month periods beginning September, October, November, and December are all greater than 10%.

However, many pundits are calling for another Sell in May and Go Away.  That hasn’t worked the last 2 years, but it certainly did in 2011.  Many sectors, particularly Tech and Biotech, have already corrected big time.  It looks like there’s more to go.  We’re also seeing what looks like sustainable strength rotating to international markets.  That’s a theme, if validated by our work, that we will move towards quickly and in size.  We’re trying to be very nimble in this choppy and challenging market environment.  We are long-term investors who are very mindful of shorter-term risks and issues. We shall keep you posted on any changes in your portfolios. Be assured we are hyper-monitoring your investments in light of the winds of war blowing in Ukraine, but lately markets have tired of war fear and focused on corporate earnings which have been pretty impressive for most of your stocks. Our income investments continue to soar as performance darlings for the past few months. (Actually for the past nine years, but we digress!)  Very soon, we will be reporting unique bond strategies for the rest of 2014. Stay tuned!

Go Giants. Go A’s. Go Markets!

By: Mike Frazier

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