Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
to the market maxim ‘Sell in May and Go Away’ have one last week to take
profits and otherwise shed equity holdings.Culling a portfolio is sometimes an emotionally charged action as even
the most steely-eyed trader develops attachments to some companies and their management
teams.For those investors who questions
the practice of reducing equity holdings during the period beginning May
through September, consider the historic data.
1950, a yearly strategy of staying out of the U.S. equity market during June,
July and August outperforms a strategy of remaining fully invested for a full
twelve months.A different analysis
found that in the ten years ending 2013, the market was down 60% of the time
between the beginning of May and the first trading day after Labor Day.During that period over the ten years the
market was either flat or slightly up only 30% of the time and experienced significant
gains only 10% of the time.
historic data has supported selling in May and a reduced equity exposure
through at last the middle of September-at least until last year.In 2014, investors who remained out of the
U.S. equity market missed out on sizable gains during the summer months.Is Summer 2015 going to be another
barn-burner for equities?
believe seasonal change is largely responsible for the May to September swoon
in stock performance.At least this is
the case in markets located in the Northern hemisphere where school, sporting
and vacation calendars are fixed by the summer season.Investing activity slows all across the board
as account holders and the professionals who serve them are preoccupied with
summer camp and trips to the beach among other seasonal delights.I do not expect that phenomenon to change any
could have been unique about the summer 2014 period was the character if the
bull market that has been running since about 2010.The five-year chart for the Nasdaq Composite
provides a clue.After reaching a post-financial
crisis high in early February 2014, the Nasdaq composite had retreated by 6.1%
from that peak.Then the report for job
creation in April came out the first Friday in May 2015, giving investors new
hope that the U.S. economy could recovery.All through the summer months the job creation reports were dramatically
higher than expected.Layered over a potentially
oversold condition, the job reports gave investors the excuse needed to bid
U.S. equities higher.
mix of conditions in 2015 seems different.Memorial Day, which traditionally marks the beginning of summer in the U.S.,
is a week earlier this year.Combined
with stunningly beautiful weather in most places, the early start signals a
long and busy holiday season.There has
been no recent retreat in stock prices to give investors a chance to get in the
door at compelling values.What is more
job growth in 2015 has slowed compared to last year.
you in September!
Neither the author of the Small Cap
Strategist web log, Crystal Equity Research nor its affiliates have a
beneficial interest in the companies mentioned herein.