Reading through news stories at lunchtime, I happened across a Bloomberg article referring to some research done by Morgan Stanley’s U.S. equity strategist saying that investors should ignore the old investing dictum to “Sell in May and Walk Away.”
It turns out that I don’t disagree with his reasoning in this case or in general, but I do think he is wrong when he claims the dictum has no statistical or empirical evidence. Last year, I did a report for YCharts looking at the statistical evidence for or against this saying?and found that, in fact, as cheesy as it may sound, there is at least enough evidence for those deeply involved in short-term positions to take heed. I’ve posted this report previously, but thought I’d dust it off again, so am taking the opportunity to post?it again today.
The Morgan strategist, Parker, thinks that in this case specifically, the U.S. economy is showing signs of a recovery and that equities are relatively more attractive than other asset classes at present. This may be true, but then again, what would one expect an Equity Strategist at Morgan Stanley to say? “My compensation is determined by how much trade flow I pull through the Morgan Stanley trading desks, but right now it looks like equities might not be a great bargain.” Hard to imagine him publishing a report saying that…
In general, though, his point is well taken, especially in the context of long time horizon investors. I’ve found that attempts at market timing of this sort end up paying dividends only in frustration and regret. That said, one of Wall Street’s favorite indoor sports is misusing or misinterpreting statistics in a way to prompt investors to act in the hopes of squeezing a bit more fee income out of them, so reports with questionable causal connections too often find their way to investor’s email inboxes.
Whether you find it valuable from an investing perspective, this YCharts report takes a bit of a different look at the “sell in May” question and received praise from readers for its originality, so I’ll pass it along. It’s a brief read, and I hope you enjoy it!