Sell in May and Go Away? Our Experts Weigh In

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Plenty of Worries

jeffreeves110By Jeff Reeves, Editor, and The Slant

I place no credence in “Sell in May” superstition for superstition’s sake. But there are a host of concerns right now that lead me to expect a spring contraction in the markets. They include:

  • Front-loaded returns: Traders are already up double digits after a great Q1. Why push it? Do we really think this could be a 20% or 30% up year? If not, then the risk-reward of buying stocks right now isn’t worth it. At best you sit on your hands; at worst you take cash off the table.
  • Growth is stalling: Recent GDP numbers in the U.S. were a cause for concern. But it’s not just us. In Europe, Spain saw a contraction in Q1 and will be lucky to grow at all in 2013, and Germany’s forecast is for a mere 0.5% growth this year. Also, China’s GDP is slowing faster than expected. So much for a global recovery in 2013 … and so much for investor optimism.
  • Weak top lines: The narrative of this earnings season is once again strong profits even as sales miss the mark. A few companies that posted a top-line miss and a bottom-line beat include shipper UPS (NYSE:UPS), telecom AT&T (NYSE:T), financial JPMorgan (NYSE:JPM), chemicals giant 3M (NYSE:MMM), tech giant Google (NASDAQ:GOOG) … and the list goes on. You can’t cut your way to bigger earnings forever.

There are other reasons, too, but these are my three biggies. I’m certainly not expecting a crash and burn, but I’m trimming some winners and keeping my powder dry for the inevitable contraction over this summer.

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