MONEY SMART By GRACE S. YUNG, CFP
Should You Sell in May? A new look at the old stock-market adage. It’s that time of year again, when flowering trees line our streets, daffodils and tulips wake up our gardens, and headlines encourage investors to consider the “Sell in May and Go Away” investment strategy. What exactly is this strategy, and should investors consider this in 2021 when we are still coping with the pandemic? “Sell in May and Go Away” is an old stockmarket adage suggesting that investors should sell their stocks in May, avoid historically weak stock market performance during the summer, and return to investing in the stock market after Halloween in November. This strategy is also known as the “Halloween Indicator.” Like many old sayings about the market, this one may have some basis in historical data, but it is not necessarily a sound strategy for making present-day decisions. Assess Macroeconomic Momentum Although we can find many interesting statistics and data points regarding “Sell in May and Go Away,” we want to be mindful about the importance of staying focused on our thoughtful longer-term plans, and we need to be aware of global market and economic forces. Here in 2021, as we slowly make our way through this pandemic, we are seeing improving economicactivity forecasts, business optimism, and bull-market momentum. Taken together, these indicators paint an encouraging macroeconomic picture. Specifically: • Global growth estimates climbing. To be sure, the global pandemic is far from over, and the loss of human life continues to be devastating. In the LGBTQ community, the impact of the pandemic has been extremely
challenging for people from a health and economic perspective, as has been documented by the Human Rights Campaign. Thankfully, progress is being made with vaccine rollouts and stimulus measures in the United States and other large economies, so we are seeing an improved outlook for global growth. Acknowledging this progress in a few large economies, the International Monetary Fund (IMF) increased its global growth forecasts in April and is calling for economic activity to increase by 6 percent worldwide, and by 6.4 percent in the United States. Along with this encouraging outlook, the IMF did emphasize the high level of uncertainty about the path of the pandemic, which we should be mindful of. • Business optimism increasing. The Institute of Supply Management (ISM)’s monthly manufacturing and services surveys are indicating that the vaccines, stimulus payments, and statewide re-
openings are driving economic recovery in the United States. These surveys are important gauges of optimism, which continues to improve across many industries as the U.S. economic recovery progresses. • Bull market birthday. The current bull market entered its second year in March. Although we do not know how far this bull will run (and we would not try to forecast this), we are interested in historical data from LPL Research that suggest bull markets tend to build on first-year gains in their second year. According to LPL Research, “stocks [have been up in] the second year of a new bull market every single time—up a solid 16.9 percent on average.” Stay Focused on Longer-Term Plans Moreover, and most importantly, the idea of selling in May runs counter to the age-old advice about staying invested and focusing on longer-term financial plans. Strategies that encourage investors to focus on headlines and
22 MAY 2021 | OutSmartMagazine.com
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