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Sell In May And Go Away?


Where has this year gone?  Although we recently spent months awaiting registration from the State of Florida (and that time seemed more or less endless), here we are nearing the midway point of 2015.  We all know that each passing year seems shorter than the preceding years, which also seemingly flew past while we weren’t looking.

The month of May has long been burdened by the slogan, “Sell in May and go away.”  Following this Wall Street lore of selling out on May 1 and buying back on November 1, supposedly would increase your overall returns.

How does this theory stack up in practice?  I went back into the DJIA records for the past couple years to see how we would have faired.  The results were interesting. In 2014, for the 6 months starting May 1, the DJIA was up about 4.9%, and for the same period in 2013, the DJIA was up about 4.8%.  Interesting, to be sure.

Many of you will remember my “Big Event” email of some months ago, in which I stated that I couldn’t justify any major portfolio changes, as the “Big Event” had not happened.  What is the “Big Event,” and why was I looking for one?

2008 was a “Big Event.” In order for the market to repeat it’s 2008 performance, economic conditions should remind us of 2008.  At that time, when we had a financial meltdown, a collapse in the housing market, and the prospect of “breaking the buck” in money market funds, the market was seriously shaken.  This is NOT 2008.

So, is the market over-valued?  In one sense, I say that it is.  Market corrections (defined as a 10% or larger drop) usually occur about once per year.  We have not had one since 2012, so we are due statistically.  Does that mean it is imminent?  How concerned should we be?

In my opinion, this is not the time to make major concessions to the naysayers.  Why?  The “Big Event” has not happened.  Despite all the problems in the world, it goes on pretty much as usual.  As such, making major changes seems unjustified.

Every investor is different, and everyone’s risk profile is unique.  During meetings in our office, together we can evaluate your tolerance for risk (defined as variability of returns) using our new technology.  We can then evaluate your portfolios to see how they match up to your own personalities, preferences and situations.  We have had a wonderful response to the new methodology, and it opens up a great forum for discussion regarding your portfolios.

We look forward to seeing you soon.  Thanks, as always, for your confidence.