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Summer’s Coming: When Trends and Fundamentals Disagree — Searching for Alpha for May 2015

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April was a cruel month for traders, as currencies, energies, equity and fixed income markets all saw important trends reverse course.  And with a negative print for the S&P 500 index, many investors are faced with a dilemma — whether or not to embrace the “sell in May and go away” mantra that has been a part of market lore for decades.  Is there anything to this idea that not being in the market between May and October makes sense? 

I explored this topic in a previous blog post, but perhaps we need to revisit in light of the significant negativity surrounding stocks.  I’m not doubting the evidence that this phenomenon has exhibited itself historically, but things have changed.

For example, while it’s true that years ago traders left their post for a summer respite, around-the-clock, global access to markets has changed that dynamic. 

And what of the market’s recent weakness? 

The key here is to determine if the current fundamentals support the equity pullback last month, or if this is a case where market action and fundamentals simply disagree.  

Our view that the economy will pick up steam as the year progresses, and that first quarter GDP was worse than expected because of weather and other exogenous conditions, supports holding onto equities rather than selling them.

Monthly Index Report For April 2015


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