“Off The Wall” Blog
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May was a LOSER
By David B. Armstrong, CFA | May 31, 2011 | Weekly Market Commentary
All 4 weeks of May ended up as losers for the Standard & Poor’s 500 (S&P 500) and the Dow Jones Industrial Average (DJIA) – not a single “up week” for the entire month. This was the first time that has been the case since June of 2008.
According to Bespoke Investment Group (BIG), June is usually a down month for the DJIA. Over the past 20 years, June has only been positive 35% of the time, with an average loss of about -1.21%. Maybe traders pulled that assumption forward and sold in May.
Most of the equity markets we track were all losers last week. The Dow Jones Industrial Average (DJIA) lost -0.56% to finish at 12,442, the S&P 500 Index lost -0.16% to finish at 1,331 and the Nasdaq Composite Index lost -0.23% to finish at 2,797. The Russell 2000 index, which tracks the performance of small capitalization stocks, was the lone winner, gaining 0.87% to finish at 836.
This May decline is on track with the belief held by many investors that it is generally a good idea to leave the market in May and return in the fall. I’ll write more on the concept of, “Sell in May and Go Away,” in this week’s U.S. News and World Report Smarter Investor blog (set to go out Friday), but the problem with it is that you never know when the market will rebound. Again, according to BIG, while the past 20 years show June as a loser, it shows July as a gainer 70% of the time with an average return of +1.46%. It also shows May as a gainer, up 60% of the time with an average return of 0.99%.
The quick point – you never know. If you are a trader, it’s perfectly fine to go ahead and play around with this. However, I bet you end up playing it right 50% of the time and come out with a nice short term tax bill as a reward. If you are an investor with a PLAN, only half of the adage is true – don’t sell in May, but still go away.
Enjoy your summer, don’t over think your statements, turn off CNBC…relax; get in some fun and family time. If the heat in Washington D.C. is any indication, summer is definitely here.
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Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC
**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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