Why Sell in May Makes Sense this Year

The old adage, "Sell in May and walk away," may apply this year more than most. While we are through the month now, the adage actually applies to the period from May 1st through October 31st and implies that stocks tend to underperform versus the other six-month period from November through April. There are several substantive macro factors at play against stocks in this year's period. First of all, according to the Federal Reserve, it could raise interest rates at any of its upcoming monetary policy meetings, marking an important shift in policy. Concern about the repercussions of this on stocks has time and again impacted equity values in the recent past. Inflation seems to be heating up as well, and it could add impetus to the Fed's tightening plans. Secondarily, there's the intensifying concern about the economy and whether first-quarter weakness is something more than seasonal. Also, the European situation is coming to a head finally, and it appears a Eurogroup deal with Greece will not happen until the midnight hour, if at all. The Islamic State has apparently made a very direct threat to the U.S. recently that applies coincidentally to the next six months and could make for volatility. As a result, if ever there was a May to walk away from, it seems this one would be it. Read my report on Sell in May. SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones (NYSE: DIA), Powershares QQQ (Nasdaq: QQQ), iShares Russell 2000 (NYSE: IWM), Vanguard Total Market (NYSE: VTI), iPath S&P VIX (NYSE: VXX).

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