The old adage ‘sell in May and go away’ has so far served to be quite painful. If you moved out in late April expecting to re-enter with lower prices later you have been had (so far). It is nearly impossible to tell the market what it should do, and this is just one of those sayings that serves to hurt the ones who listened. However, with a couple of weeks left to go in the month there is time for some give back, and with most markets fully stretched out at all time highs it would not be shocking to see it.
The SPX 500 is already up 4.4% this month, the Dow Industrial are higher by 3.3% and remember the Russell 2K? The broad index that was ‘struggling’ to keep pace in April and was THE one ‘clue’ saying markets were going to fold. That was the warning shot told several weeks ago from many technical geniuses. Well, this index is quietly leading the way, rising more than 5% so far in May. The pace is for a 10% return in the month of ‘go away’. Indeed!
Now, let’s be realistic here – these kinds of monthly numbers are NOT sustainable for an economy growing at its current pace. So, what is my expectation? I suspect the markets will have some type of selling back to a more ‘rational’ level, but I will not call out the timing of the move nor the size of it. That is not my game, rather I will respect the trend, take profits on winners and move on from trades that are lagging. I won’t panic but will go with the flow. This past week was ideal for taking stuff off the board – which is what we did in earnest. Sell when they want ’em, buy when they don’t.
Markets prove everyday to make most everyone with an opinion look foolish. Just this past week we heard some loud noise comparing this market to 1999 a great time for stocks. Did that help temper the enthusiasm? Friday saw the SPX tack on another 1% to its already new high. Trying to guess what the market is going to do is an exercise in futility. I suspect more guesses are on the way with more statistics to back up positions, but frankly the market will guide us much further.