Given presidential election, Fed pause, no need to sell in May, says Cresset

GIVEN PRESIDENTIAL ELECTION, FED PAUSE, NO NEED TO SELL IN MAY, SAYS CRESSET

Jack Ablin, chief investment officer and founding partner at Cresset, is weighing in on the old adage “sell in May and go away.” This adage has been kicking around Wall Street for decades, leveraging the fact that, historically, a good deal of the market’s return has been delivered between November and April.

The market entered this May with a 5.6% YTD gain in the S&P 500 SPX. With a strong rise so far in May, the benchmark index is now up around 11% YTD.

Does it make sense to heed this adage and sell?

"Not really, and especially not this year," writes Ablin in a note.

According to Ablin, historical data shows that while the May-October period has been the weakest six-month cycle for the S&P 500 since 1950, returns have nonetheless been positive on average.

"More recently, over the last 10 years, May-October returns have been positive, although they consistently trailed the November-April stretch," he writes.

Ablin notes that volatility, a measure of market risk, on average is higher in the November-April period, although September and October have the highest monthly average volatility – "think Black Monday (October) and the Lehman Brothers collapse (September)."

In any event, Ablin's bottom Line is that investors should continue to hold equities through the May-October months – particularly those investors who face capital gains taxes.

He adds that presidential election years tend to see better stock performance in the May-October period vs mid-term and non-election years.

Moreover, Ablin says that "the current pause in interest rate hikes by the Federal Reserve is one of the longest in modern history, and long pauses historically have presented a favorable backdrop for equity investing."

(Terence Gabriel)

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