Monday, 2 May 2016

Sell in May or hold?

Stocks in the United States fell last week, but there are reasons to think that further falls could be limited in May despite the month's negative reputation.

The Standard & Poor's 500 Index fell 1.3 percent last week, its biggest loss since the week ended 5 February.

Despite that loss, the S&P 500 still finished April up nearly 0.3 percent for its first two-month win streak this year.

However, with the month of May up next, is it time to follow the adage "sell in May and go away"?

Analysts cited by CNBC mostly think not.

Paul Hickey, co-founder of Bespoke, said: "We're seeing strong breadth in the market," he pointed out. "As long as that holds in there, it's a reason to hold in May, not sell in May."

Daniel Suzuki, Bank of America/Merrill Lynch equity strategist, said underweight positions and a lack of positive sentiment "are reasons to believe the market can grind a little bit higher from here". However, he also sees stocks ending the year at lower levels and that "we would be fading the rally."

"Historically this is the kind of year" for sell in May, said Sam Stovall, chief US equity strategist at S&P Global Market Intelligence. "We are in the fourth year of a president's term in office, in which two unknowns are running for president."

Still, Stovall did not recommend selling the market but rotating stocks instead, pointing out that consumer staples and health-care stocks historically show strong outperformance in the May to October period.

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