Readying Your Portfolio for Summerby
"Sell in May and Go Away"
The old adage follows data collected by father/son team Yale and Jeffery Hirsch for their Wall Street must-read, the Stock Trader's Almanac. Specifically, they determined the Dow Jones Industrial Average has averaged a return of just 0.3 percent during the May-October period since 1950, compared to 7.5 percent November through April. So sell in May, but make sure you buy back in November. Happy summer vacation.
More recently, the argument in favor of selling has become even more pronounced. The S&P 500 Index has declined an average of 1.8 percent from May 1 through August since 2009. Given this year's volatility and unimpressive start (the S&P 500 Index is up 1.5 percent year-to-date and the NASDAQ Composite Index is down 2.5 percent), we wonder whether investors should sell in May -- and run away?
Technical strategist Chris Verrone of NASDAQ Composite Index offers his own answer to a possible summer vacation: Pick your spot wisely. Chris analyzed sector performance (May-September) since 1989 and determined five groups have managed to generate positive returns, led most notably by health care (+3.2 percent).
Attentive readers will note we've highlighted life sciences companies twice recently:
- Health care generally as being Strategas Research Partners
- Biotech deeply oversold
to large cap pharmaceuticals (April 11)
For investors looking to follow Mr. Verrone's observation regarding broad health-care outperformance, we suggest the iShares U.S. Healthcare ETF (trading at parity ). It trades an average of 236,000 shares per day and the chart indicates the one-year uptrend is still intact. Sell in May -- but not everything.