"Sell in May Go Away"

As promised the "sell in May go away" crowd is out in full force.  While you can never predict the future of the market the validity of this strategy does carry some merit.


Here are some details courtesy of a story in Forbes

• The adage is based on the historically weaker performance of stocks during the May through October time period. Adherents shift from stocks to cash at the beginning of May and then invest back into stocks at the start of November.
• Jeff Hirsch at the Stock Trader’s Almanac calculates that the Dow Jones industrial average has an average return of just 0.3% during the worst six-month period (May through October) since 1950.
• Conversely, during the best six months (November through April), the Dow has an average gain of 7.5%. Sam Stovall at S&P Capital IQ says the S&P 500 has risen by a mere 1.2% during the average worst six-month period, while rising 6.9% during the average best six-month period. (Sam’s numbers go back to 1945.)
• From the end of April 2011 to the end of October 2011, the Dow lost 6.7%. Using the October 4, 2011, intraday low as the endpoint, the drop worsened to 19.1%.

At any point throughout the year there are a plethora of reason to either be in or out of the equity market.  Certainly there is cause for concern given continued European debt issues, a slowing China, and the "fiscal cliff" that the U.S. is heading towards with the expiration of various tax cuts.

However, there are also companies that continue to defy the odds with increased growth in both revenue and earnings.  With the U.S. dollar still relatively weak and the manufacturing productivity machine on high speed, there are still pockets of opportunities to invest in.