| NEW YORK
NEW YORK May 26 "Sell in May and go away" is
perhaps the oldest saw on Wall Street, but it appears there's no
shortage of U.S. mutual funds doing exactly that this year.
After all, the S&P 500 has delivered a total return,
including reinvested dividends, of 10.8 percent over the last
six months, essentially capturing all of the average rolling
12-month total return on the index since 1990, so why not cash
Indeed, political drama and high valuations are clearly
driving some investors to take profits. American fund investors
have yanked more than $17 billion from U.S. stocks so far this
month, data from fund tracker Lipper shows, with some $10.1
billion in withdrawals in the latest week alone, the second
biggest outflow for the year.
Some hearty investors, however, stand ready to bet against
that flow - and history - and are advocating a buy-in-May
approach this year.
"If anything you might want to buy in May and sell in
November," said Chris Zaccarelli, Chief Investment Officer at
Cornerstone Financial Partners, in Huntersville, North Carolina,
who bases his bullishness on the healthy outlook for the global
economy rather than expectations for a policy boost from the
While stocks appear to have priced in hope for a Trump
stimulus this year, Zaccarelli says his expectations for
progress on Trump's agenda in 2017 has recently tumbled to 40/60
from 80/20 because he doesn't see Trump gaining enough support
from a severely divided Republican party, which suggests to him
that selling will be more opportune a few months down the road.
"If we go the entire year and Washington does nothing, no
tax reform, no repatriation, I think there will be a little
disappointment," he said. "Ironically enough, the disappointment
will be in November or December because people will realize they
went the whole year and got nothing done."
AN OLDIE BUT A GOODIE
The sell-in-May tactic has been kicked around Wall Street
for decades and is premised on the historic outperformance of
the November-May period over the other six months of the year.
In the last 20 years, a $100 investment in the S&P from
November through April would have become $343 while a $100
investment in May through October in the same years would have
slipped to $98.5, according to Bespoke Investment Group, in
Harrison, New York.
From 1928 to 2017 the $100 would have become $4,270 from
November through April but would only be worth $257 from
investing from May through October, according to Bespoke.
In the summer months "things slow down so you tend to see
the chances for a pickup in volatility. That's usually
accompanied by weakness in the market," according to Paul
Hickey, Co-founder of Bespoke Investment Group, LLC who is not
selling now as he still has "a positive view toward equities."
Other factors that can drive a summer lull include a
corporate tendency to hold stock-boosting investor meetings
early or late in the year, a reduction of over-optimistic
analyst estimates around mid-year, and a boost just ahead of the
end-of-year holiday shopping season, says Linda Bakhshian,
portfolio manager at Federated Investors in Pittsburgh.
John Augustine, Chief Investment Officer at Huntington
National Bank in Columbus, Ohio said he is "taking the opposite
tack to "sell in May" and moving into U.S. small and mid cap
stocks which have underperformed large caps so far this year.
The small cap Russell 2000 index has risen just 1.8
percent year-to-date compared with 7.8 percent for the S&P 500,
6.6 percent for the Dow Jones Industrial Average and 15.3
percent for Nasdaq Composite.
"To sell we'd need a Fed that's more hawkish than expected
mixed with economic data that's weaker than expected. That
combination could give us a domestic stock sell off this summer.
But markets have discounted that this week based after Fed
minutes, thinking the Fed would stay dovish this Summer," said
(Reporting by Sinead Carew; editing by Dan Burns and Andrew