What Every Investor Should Know on May 1st
“What Every Investor Should Know on May 1st”
By: Adam D. Koos, CFP®
President / Portfolio Manager
As we close in on the end of what we call “the seasonally strong months of the year,” the US market continues to chug along. One might consider the old adage, “Sell in May and go away” to be a timely strategy and I think most investors would share the same concern(s). After all, the S&P500 has continued its upward move without a real crash for more than six years now, US debt continues to rise, the middle-east seems to be a never-ending problem, and LIMRA reports that both fixed and variable annuity sales are down, year-over-year!
I threw the last one in there for my own entertainment, but annuity sales (or lack thereof) are one of many contrarian indicators. Annuities have higher fees than the average investment portfolio, due to their additional bells & whistles. But when markets rise, investors’ emotions are held at bay, and those same investors feel less apt to purchase an investment with a higher cost when they can make more money investing directly in the markets without a guarantee.
Back to the market…
While there will always be a reason to sell your investments – or more so today, there will always be a reason not to buy (to instead, leave your money sitting in the pits) – there is still a lot of good to be said about the current state of the stock market.
International stocks struggled as the US Dollar screamed northward late last year. What goes up doesn’t always come down – but in the case of the Dollar, and considering all the debt we’ve issued in the United States – it’s unrealistic to think that the Dollar could continue to rise much further than it already has.
Sure, there’s a possibility of short-term upswings, but we simply have too much debt and entirely too much currency in circulation to support a high dollar in the long run. With that, international stocks have come back around turn 1, hit the accelerator, and I’ve made some adjustments in our clients’ portfolios as a result.
Since US stocks are what the majority of the population is focused on, that’s where I’ll aim my attention today.
As I mentioned above, May 1st is the end of the “seasonally strong” months of the year, which means we’re entering the “seasonally weak” months, which will carry through November 1st. The significance of this phenomenon is huge.
If you invested $10,000 into the DJIA (Dow Jones Industrial Average – “The Dow”) on May 1st, 1950 and sold your investment on October 31st that same year… and then did this every year (buying on May 1st and selling on October 31st, every single year), your $10,000 would’ve fallen to $9,319 by the end of 2013!
But what happened if you did the opposite? If you invested $10,000 on November 1st, 1950 and sold your investment the following April 30th… and then did this every year (buying on November 1st and selling on April 30th, every single year), your $10,000 would’ve grown to $775,055!
I’ll be updating the numbers within the next couple weeks with current information and some visual aides, but you get my point. Armed with these statistics, it’s no wonder CNBC, FOX Business, and almost every media outlet starts talking about this phenomenon, come May 1st.
With that all said, it’s important to arm yourself with an additional nugget of knowledge that might not be so obvious. While the “seasonally weak” months begin in just a few days, 2015 is unique. This year is a pre-election year, and there has not been a losing year in the Dow since 1939.
Furthermore, if you take a glance at the chart below, you’ll see a lot more positive than negative.
- Over the last year, with the exception of a short, 45-day period in Sept/Oct, the S&P500 has been showing us high-highs and higher-lows, which is representative of a healthy, rising market.
- The 50-day moving average (DMA), in blue, is above the 200-DMA (in red).
- The spread between the 50-DMA and 200-DMA is widening, and
- The S&P500, 50-DMA, and 200-DMA are all trending up.
If you’re looking for the perfect time to stop procrastinating and invest the cash you’ve left sitting on the sidelines, the best time would’ve been in mid-October. But who cares?! Look at the chart below and you tell me… how many “buying opportunities” have their been over the last three years. Buying opportunities, meaning, times when the market offered a short-term “sale” to get in at lower prices!
The US market still looks VERY strong and when I start to see weakness, I’ll let you know – and I will have already made adjustments to our clients’ portfolios in response to said weakness. If you want to participate in up-markets, but you’re afraid of participating in all of the next crash as well, contact our office so we can pull up some slides on how we manage portfolios and show you that “Buy and Hope” is not a strategy we employ, and not one you should trust your hard-earned money to, either.
If you or someone you know has any questions regarding portfolio management,
estate planning, or financial planning, please contact us and we’d be happy to confidentially discuss your/their personal situation further.
Our office is an Adopt-a-Platoon “parent” for US Soldiers overseas and we send a care package overseas to an active-duty soldier once a month. If you plan on coming into the office soon, please remember that you’re welcome to bring any items along with you for the package. If you’d like to see our current soldier’s wish list, reply to this email and we’ll forward it to you.
Till next time,
P.S. If you think this type of information would be beneficial to anyone you know, please feel free to pass it on.
Data as of market close – 4/27/15
|S&P500 (US Stocks)||0.5%||3.7%||1.8%||11.2%||17.7 %||7.6%|
|Dow Jones Industrial Avg. (30 US Stocks)||-0.2||3.0||0.7||8.2||14.6||7.1|
|NASDAQ Composite (4,000 US Stocks)||1.4||7.1||5.9||22.0||24.3||14.3|
|MSCI World ex-US (International Stocks)||5.1||9.1||10.4||0.3||3.2||4.2|
|Barclays US Aggregate (Bond) Index||0.2||-0.5||1.2||2.6||1.3||0.8|
|PowerShares DB (Commodities) Index||4.7||6.4||-2.0||-31.6||-2.8||-2.5|
Notes: All index returns are rounded to the nearest tenth percent. All data above sourced via Yahoo! Finance. The proxy used for international investments is the ACWX (all country world index ex-US). The proxy used for commodities is the DBC (PowerShares commodities index). Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.