Over the last several years we have gotten use to the adage of “Sell in May and go away” being all too true. While I caution vehemently that this article is not a prediction of May returns I’d like to make a case for why this could be the year that we buck the trend.
Political headwinds have become tremendously subdued in comparison to recent years. We have a budget for the next 2 years that reduces sequester cuts substantially. Last week we saw the debt ceiling get lifted without a murmur of an impact to the markets. What could prove to be the most impactful factor is that this is an election year. I cannot remember the last time politicians ruffled feathers during an election year… career suicide.
Federal Reserve Tapering has become a part of the norm as opposed to this feared action that could crush our economic growth. Not only have stocks fared okay, but we’ve actually seen the 10 year treasury retreat from 3.04% at year end to 2.75% on 2/14/2014[1].
Inventory Build-up is something I’ve mentioned over the last few weeks. 3rd quarter GDP was an amazing 4.1%, much of which was attributed to inventory build-up. As those inventories dwindled during Q4, 2013 and Q1, 2014, it should lead to strengthening industrial and manufacturing figures in Q2, 2014[2].
Weather is believed to have had a significant impact on sluggish US economic growth over the last 2 months. As that weather easies it’s possible that we would see consumer spending pick up from pent up demand[3].
International growth has taken stronger form as Q4 GDP came in at a 1.1% annualized rate. The UK has revised their 2014 GDP projects up to 3.4% from 2.8%[4].
All things considered I think there is a good case for why May 2014 may not hold the same fate the last several years has been relinquished to.
If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment. Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.