Hindsight is a Beautiful Thing – Weekly Market Watch

“Sell in May and go away”  is an old Wall Street adage.   It actually originated in England as “sell in May and go away” until St. Leger’s Day which was in mid September.   Its roots are in historical stock market performance data that show something like 80%+ of total historical stock markets gains have been achieved during the months of November through April.  This May it appears as though it was the worst May for domestic equities since 1940.  The S&P 500 Index ended this month down 8.2%.

Fundamentals determine the long term direction and value of the market but technicals and news can drive the short term.  We certainly have a barrage of bad news with the BP oil spill in the Gulf, growing geopolitical tensions in Korea, Thailand, and the Middle East, Greek and Spanish debt problems, the potential for bank credit rating downgrades with the passage of financial reform, the government slowing down or stopping new offshore drilling, and the sell in May rhetoric.

The good news is that the on balance the global economic recovery continues.  Keeping things in perspective is important.  The markets will go up and down but generally go up.  Let’s hope that investor sentiment will stabilize and that this correction soon ends.  The markets will find a bottom and then we can begin a recovery process.

by Richard Taylor

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