Explore Our
“Off The Wall” Blog

Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.

Sell in May and Go Away is Not Looking Good This Year

Sell-In-May

Yeah – how’s that advice working out for investors these days?  Patient and prudent investors will probably close the summer out with a 3 pointer from the top of the key and will get to yell out “IN YOUR FACE!”  Or better yet, are yelling it out from their beach chairs…

Out of nowhere, we have seen a silent summer rally.  I saw a clip this week of a financial advisor on Fox Business who was asked back on the show after calling May the beginning of a “bear market”.  Watching him explain that call was as amusing as watching a 5 year old trying to get out of those tubular Finger Cuffs you get at a school fair.

While the week was a loser overall, both the Standard & Poor’s 500 (S&P 500) and the Dow Jones Industrial Average (Dow) closed higher on Friday as Federal Reserve (Fed) Chairman Ben Bernanke reassured markets by saying that the Fed still has “scope for further action.” The discussion over further easing will continue this week as the Fed chairman is scheduled to speak in Jackson Hole.

Here’s how the markets ended up for the week. Note that I’ve added some new information.

index 8-27-12 yields commodities

According to the minutes from the July 31 – August 1 Fed meeting released last Wednesday, it appears they are gearing up for new measures that they believe will encourage economic growth, better insulate the U.S. economy from global shocks, and lead to more acceptable conditions for the unemployed – all without stoking any inflation.

The minutes revealed, “Many members judged that additional monetary accommodation (this means new policy measures) would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery”.

Problem – There hasn’t been much economic data suggesting that “a substantial and sustainable strengthening” in the recovery is at hand.

Substantial?  Hardly.  Sustainable?  Ummm…possibly.  Substantial AND sustainable?  No.

Fed members believe that another round of Quantitative Easing (dubbed “QE3”) would put “downward pressure on longer-term interest rates by contributing to easier financial conditions.” In other words, they believe it would encourage businesses and consumers to spend and borrow.

I think higher equity prices make people feel wealthier and that’s the best way to encourage additional outlays.  In fact, with rates as low as they’ve been over the past few years, if people are not borrowing now it’s not because of rates.

Upcoming Week

In addition to the aforementioned Fed meeting in Jackson Hole, which will probably be the highlight of the week, we have European Central Bank (ECB) President, Mario Draghi, taking the stage on Saturday at Jackson Hole as well. His late July promise to do whatever it takes to save the euro has played a big role in calming European debt markets and providing support for U.S. equities. Market participants will be looking for more signs that the ECB is set to provide some follow through at its early September meeting.

Our Thoughts

Our position remains that the U.S will not see a double dip recession so long as housing does not experience another downturn, and our domestic economy will continue to grow in the most modest of ways.  2012 will probably end up looking a lot like 2010 and 2011, where slightly weakening or sideways markets will give way to improvement over the Fall.  Given that a little weakening or sideways action would take place from a +11% YTD number on the S&P 500 suggest to us that the overall YTD return should be much better than people may think.

Please call or email with questions.

IMPORTANT NOTE: Due to industry regulations, comments are not permitted on this blog. If you would like to contact the author, please email us at info@monumentwm.com.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

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 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values.  The 2, 10 and 30 year Treasury is simply the yield at the close of the day.

(1)      West Texas Intermediate crude spot price is as of end of week.

(2)      London Bullion Market Association; gold fixing pricing at 3 p.m. London time.

David B. photo

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....

Learn more ...

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.

A copy of the Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures. Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.

Please Remember: If you are a Monument client, please contact Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Stay up to date!

Subscribe to our “Off the Wall” Blog for articles and videos on all things wealth management, by all members of our Team. Unlike Facebook, we will never share your data with anyone.