Sell in May and Go Away, Come Back St Leger's Day
Posted by jdavis on May 20, 2008
We have been watching closely the mini-rally in the stock market since we turned cautiously bullish in February – you may remember our diatribe then when we told you that, even with all the gloom and doom in the market, we were somewhat optimistic. Well, our favourite-to-follow market, around which everything else revolves, the S&P 500 in the US, has risen since January from 1260 to 1440 – a rise of a solid 14%.
What you see here is the S&P since 1950 and the difference in performance between May to October each year and November to April. There is an abundant clarity that the market does best in the Winter. Of course, it doesn’t happen every year but we are confident that this year it does apply.
Thus, we’re taking few risks from now, for at least the summer and we’ll see how it goes over the next several months.
There are still huge market and economic risks out there. Oil, which makes up a large part of the market, could well be topping out soon at c $130/$135 per barrel ($130!!! – it was only $20 5 or 6 years ago…- but they tell us we have little inflation. Phooey!) In fact, as the $ continues to rise, in the short term, we can see a significant pullback this summer on commodities and gold.
Our favourite economic topic, as you may recall, is house prices. You may also recall we forecast big falls. Well, they’re down c 9% according to The Halifax since late last summer. Of course, the reality is that prices are down 15-20% since then if you really want to sell. Of course, most don’t realise this and are still clinging to last summer’s pre-Credit Crunch prices. Hence, you don’t see that many Reduced Prices in the listings. Sooner or later, they’ll realise it’s a forlorn hope and they’ll sell low – lower than now (much lower).
Remember our investment strategy which we call The Sir Alan Sugar Methodology of Investing – Buy Low, Sell High…
Another important issue is the €. We feel that it has topped out at 1.6 to $1. Thus, it could well be time to move out of €. The € has served everyone extremely well but please remember nothing moves in a single direction for ever. The rise of the € has been instrumental in the rise of commodities and gold.
At Armstrong Davis, we are serious about preserving capital, first and foremost. Remember, the way to make money is to keep it after you’ve made it. After we preserve, we will then aim to grow it efficiently when there are opportunities.
Long term, commodities, agriculture and precious metals are going to the moon. These will make a lot of money for you. Not necessarily short term.
Who do you know who could benefit from a no-obligation review of their investments. We tend to work with clients who hold between £300k and £3m in investments and cash (or who are 6-figure earners) and some of our clients have 7-figure investment accounts. We’re looking for our first 8-figure client.
We merge our expertise of markets and macroeconomics with financial planning tools to provide excellent financial advice to high net worth families and trust funds.
Please remember, investments can fall as well as rise – and they will.