Sell in May – Go Away!
Market timing blares its horn each spring as the common adage rings, “Sell in May and Go Away!” This calls for selling your portfolio in May only to reinvest the coming October, therefore reaping potential higher risk adjusted returns. Though certain factoids support the sentiment, is it truly in your best interest? Economists continue to debate; however, 2020 brings about a new realm of uncertainty and implementation risk. With market swings, worldwide protests amid racial inequality and the ongoing pandemic, investors must carefully evaluate their course of action, or inaction.
Historically speaking, market timing has been no easy feat for both the common investor and professional strategist. Though there is the potential of benefiting from slightly higher returns, it begs the question of what is at stake. Monthly S&P data compiled from January of 1928 through March of 2020 illustrates positive returns from November to April at 71% and May to October at 65%. With the current economic turmoil, more than 30 million Americans have filed for unemployment between mid‐March and late April. The current GDP contracted by 5.0% in the first quarter which exceeded economic projections, and oil prices sank more than 70% year‐to‐date. However, the Federal Reserve is heaving trillions of stimulus dollars into the economy and benchmark interest rates are nearing zero. With the additional layer of the extended tax deadline this year, it is nothing less than complicated.
So where does that leave us? With levels of data on each side, the metric of risk versus reward is heavily weighted. Times are certainly unprecedented and market timing can be a dangerous and costly game. Fortunately, long‐term investing minds no consequence of the seasonal parody. The benefits of diversified longevity within a buy and hold strategy continuously outweigh that of attempting to buy and sell based on specific tendencies. While the reality of enduring the toughest days within the market is unavoidable, the benefit is that of securing the strongest times as well. We believe this can help deliver positive returns for persistent investors with long‐term visualization for their portfolios.
Source: https://www.kiplinger.com/slideshow/investing/T031‐S001‐sell‐in‐may‐and‐go‐away‐should‐you‐in‐2020/index.html. This is intended for informational purposes only and should not be construed as legal, investment or financial advice. Please consult your legal, investment and financial professionals regarding your specific circumstances.