There is an old adage on Wall Street that you have probably heard, “Sell in May and Go Away”. As tempting as this simple solution sounds, it’s not always the right answer. The saying comes from data that shows that historically, returns have been much lower during the “seasonally weak” six-month period, May 1st through the end of October. Consequently, November 1st through the end of April has become known as the “seasonally strong” period in the market. Since 1950, the Dow Jones Industrial (DJIA) has had an average annualized return of 7.20%, with the bulk of this return coming during the seasonally strong period. The average return in the DJIA during the seasonally strong period has been 7.03% (only invested in the seasonally strong six months) versus an average return of just 0.15% (only invested in the market during the seasonally weak six months).
While the bias is strong and convincing, on the other hand, there is historical precedent for the market to produce good returns during the seasonally weak period. Just last year, the DJIA posted a positive return of 11.64% from April 30th through October 31st and during six of the last ten seasonally weak periods, the market has finished in positive territory.
So, what does this all mean? Listen to the markets. Volatility has picked up in the market over the past few months; however, US Equities remain the number one ranked asset class in our system. International Equities continue to hold the number two ranked asset class. We continue to view these areas as the leaders in the market.