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Beach Season . . . again!

04/30/2014

Every year, we wrestle with this same issue — the old Wall Street adage to “sell in May and walk away.”  It goes back to the days before air-conditioning when Wall Street literally moved to the Hamptons for the summer, reducing trading volume which limits price action.

But, is there any truth to old adage — yes!  Take a look at the market gains since 1950, and you will see most gains come between November and April.  The period from May to October is lackluster.

Chart of the Day
May to October time periods are the gold-ish line running horizontally across the bottom.  November to April time periods are the sharply increasing blue line.
Does that mean you should sell your assets and sit on cash on summer?  No, because that is a 100% bet, meaning you are betting that you know the exact day to exit the market and the exact day to re-enter the market.  More importantly, you are making the bet that history is 100% guaranteed to repeat itself, and the bulls will not run during the summer.
The way to deal with this market prospect is to manage your expectations.  Don’t look for much appreciation this summer or any summer.  Sitting on extra cash shouldn’t be a problem.  You should also go to the beach more this summer.
One semi-related thought is that the second year of a presidency is usually a lackluster 5.9%, almost entirely in the fourth quarter, after the uncertainty of the election goes away.  Like I said, you should go to the beach more this summer!!  Make your plans today . . . GO!

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