Ques: What do Sell in May people do if the markets go up during May?

Comments

• Ted

  May 2016

  @hank: If you out of the market, wait till October to get back in. From June-September the maket generally trades sideways .
  Regards,
  Ted
• hank

  May 2016 edited May 2016

  But Ted, October is only a month before the election. Anything might happen than!
• msf

  May 2016

  While there are vague trends, the "error bars" are so huge as to make time of year trading an exercise in futility. It also depends on the time period you're looking at. There seem to be few consistencies: September seems to be on average worse than other months, February tends to be a slight loser, and April a bigger winner on average.
  
  
  
  
  That was a Bloomberg chart, long term, ending in 2012. A couple of less authoritative charts, ending in 2010 from Squirellers are:
  1971-2010
  
  
  and 2001-2010
  
  
• Ted

  May 2016

  2Hank: For 1990-2015, 18 Octobers have been winners and eight losers.
  Regards,
  Ted
• MJG

  May 2016 edited May 2016

  Hi Guys,
  
  I'm very much with msf's perspective relative to the "sell in May" conventional maxim; the statistical data is wild and very timeframe sensitive. Here is a Link to an article that appeared in USA Today in early May:
  
  http://www.usatoday.com/story/money/2016/05/01/sell-stocks-may-investing-strategy-wall-street/83717490/
  
  The simple bar chart that closes the article clearly demonstrates the sensitivity of average returns to the data collection period.
  
  From my perspective, although the summer doldrums are more risky, they are still slightly more likely to generate positive, muted returns. That's only a slight odds tilt to favor the investor.
  
  But I'll accept it. I did nothing with my portfolio this month and will do nothing next month. I've been doing nothing in terms of seasonal strategies forever. The statistical standard deviations are too wild for reliable market timing.
  
  Best Wishes.
  
• catch22

  May 2016 edited May 2016

  Hi @hank
  You noted:"In addition, unless those who sold in May moved to cash, they've likely experienced a loss in their domestic or international bond funds over the month as rates have spiked."
  The below M* category link covers most areas. The first column is M*'s 1 month average return for a given category.
  Our largest holding in this area, investment grade active managed bond fund, BAGIX is +.67% for 1 month.
  The last few days for Treasury auctions of 2, 5 and 7 year notes has found takers from all areas..........with an average of about 66% going to foreign purchases. U.S. dealers reportedly did not get their allotments. I don't see this trend changing and will keep pressure on yields remaining low and prices higher for many investment grade bonds (gov't in particular); regardless of what Ms. Yellen states today and/or a rise in rates from the Fed.
  
  http://news.morningstar.com/fund-category-returns/
  
  Regards,
  Catch
• hank

  May 2016 edited May 2016

  @Catch, Thanks. I'm surprised to see gains for most bond categories this month in the face of Fed rumblings and the 10-year spiking. Than again ... I never understood bonds. Note that the data was as of last Monday, May 23 - so could change.
  
  Thanks for the link. Regards
• jstr

  May 2016

  As with any variable that is covered by the financial media and literature, a "one off" analysis and use only goes so far and can produce spotty results. It is the combining of quantitative variables and selective use of different stock universes that have produced statistically significant results and have provided consistent positive outcomes over long test samples. For example, applying the Sell in May effect combined with the academically proven alpha premium produced by small cap value universe, utilities sector, and cash allocation ( cash allocation during May - Oct in years deemed high risk as determined by an empirically derived risk variable ) has produced 490 bp CAGR alpha premium over buy & hold of small value over a 60 year sample. Further, fifty five 5 year rolling total return periods have shown:
  - 79% of periods produced > 100% returns, median period 146%
  - 13% of periods produced between 50 - 100% returns, median period 85%
  - 1 period with a loss
  
  Thus strong statistical evidence and a bi annual, systematic switching process such as this, can trump skepticism. Additionally, the use of small cap value fund provides diversification over hundreds of companies and the utilities sector and cash allocation provide more conservative exposure and capitial preservation during the part of the year which has proven more/most volatile, statistically speaking.
• Old_Skeet

  May 2016 edited May 2016

  I sold and reduced my allocation to equities during the first part of May. According to my valuation matrix stocks are both currently overvalued and overbought by my perspective. In checking one of my reference sources (WSJ) stocks (S&P 500 Index) are currently selling at a TTM P/E ratio of 24.0 and a few other valuation indicators that I track indicate concern. With this, I plan to again reduce my equity allocation during the first part of June and when completed I will be somewhere around 45% equity. Over the past few years I have been reducing my allocation to equities from a high allocation of about 65%+ downward due to what I felt were overvalued and overbought market conditions.
  
  Year-to-date my portfolio (including it's cash position) is up 3.5% while the investment positions combined are up 4.2%. In comparison, the Lipper Balanced Index is up 3.0%.
  
  Come fall (or perhaps even sometime during the summer) should I feel conditions warrant, I plan to raise my allocation to equities reducing my allocation to cash; however, the proper set-up within my valuation matrix will have to be present for me to do this. Otherwise, I will remain with equities bubbling towards their low allocation range.