We’re officially in the month of May, and you know what that means: the “sell in May and go away” adage is being tossed around Wall Street. I’ve never been a fan of this phenomenon, where investors dump their stocks in May and don’t return for six months.
Historically, the stock market is strongest between November and April and weakest between May and October. However, if you simply exit the stock market during this six-month period, you’re wiping out any opportunity to make money this summer — and there are always opportunities.
This is truer than ever, given that interest rates will continue to remain ultra-low for foreseeable future.
On Wednesday, the Federal Reserve revealed that it remains dependent on economic data, which has been weak in some areas of late. Just last week, we received word that the U.S. economy grew at a paltry 0.2% pace in the first quarter, after growing at a 2.2% pace in the fourth quarter and a 5% pace in the third quarter.
So, the economic data are not cooperating for the Fed, which is looking for even more improvement in employment figures and for inflation to rise closer to 2% before even considering an interest rate hike. Many economists are now predicting that the Fed will not raise interest rates until at least the third quarter.
As a result, rates will remain at rock bottom levels, and since the stock market continues to yield more than treasuries and the bank, investors will continue to flock to the stock market.
So, please don’t buy into the “sell in May, go away” story. I’ll have more details on this phenomenon soon, and we’ll discuss further why I never follow this strategy.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
