On Pointe – Wealth Management Edition
It’s May… Now what I’m supposed to do? Surf or trade stocks?
Readers of On Pointe know how we watch the calendar for clues to how to best approach the markets. Readers also know our team is lovers of the Great Outdoors… And summertime is one of the best times for outdoor fun.
May is one month closer to summer, so we’re getting prepared! But what about the markets? Are they too, preparing lazy, hot days in the sun?
One popular market adage “Sell in May and Go Away” does have some historical precedence. We call this the “seasonally weak” period for markets. Interesting, what does that mean?
It’s based on a historical pattern that stock market returns tend to be lower during the summer months. Whereby the seasonally “strong” months are from November to… well, May.
Since 1990, the S&P 500 has averaged a return of about 2% annually from May to October, versus about 7% from November to April. (Investopedia)
So, are we better off battling surfing at the beach or finding market opportunities?
(Side note… I am going to learn to surf if not this summer or next. Add that to the list of “bagging peaks” I haven’t climbed and sections of the Appalachian Trail I haven’t hiked)
Let’s dive a little deeper…
There are a few different theories on why this pattern exists.
How about taxes? Investors have received the news from their accountants and it’s not always rosy. Some are likely on extension and will end up paying their taxes in October.
I’m not sure about this one but can summer vacations be to blame? Summer vacations lead to lower trading volumes and more volatility in the market… this one I’m calling out. The personal computing power and remote work capabilities shouldn’t lead to lower trading volumes. I once placed trades on the side of 1-95 South on my way to North Carolina!
Whatever the reason, there is a pattern for summer months for the markets to be, well Dog Days.
So, what is one to do? Sell their portfolio and head to the coast? Not quite but there are a few ways we manage portfolios during these “weak” periods.
Our solution? Re-evaluate portfolios.
The first days of January usually form the direction of the markets. Once the direction begins to unfold money flows in or out of the markets to find its new home. New trends form or old trends persist.
Much like weather patterns… those of us who enjoy the outdoors (you too beach lovers) know the weather forms patterns. Even if the patterns are volatile, there are evident trends. The key is to watch, observe, AND react. (The doing part is sometimes the hardest for people)
Volumes throughout the winter and spring months expand. Money managers are eager to set a precedent for their portfolio’s performance to move money.
Yet, the pace of money movement can exhaust itself. Perhaps fitting that the markets race through spring (and tax season) into May and then slowly grind away.
A fun way to look at the first 2 quarters of market action… it is like those few rough days at the beach, with heavy surf and wind pounding the shore. But then the next day, the wind dies down, the surf flattens, and it becomes quiet, more peaceful.
These “dull” days may make it challenging to find the “right” wave to pop up and ride in but there are a few out there…
In short, the summer months don’t mean you ignore your portfolio or sell out.
What it does mean for us is to ask a couple of important questions… Where are the markets trending and will they continue these trends? Is the portfolio invested in the right trends right now? Can we do any last “spring cleaning” of the portfolio? Watch, observe, and react…
Stay tuned for how this summer turns out… maybe we’ll catch the “Big One”!
Join our growing list of C-Level Executives in Emerging Industries (Cannabidiol, Cyber, Computer Software) for our timely and informative bi-weekly newsletter. Enjoy topics with a twist in a storytelling format you can’t wait to read!
Registered Representative of Thurston Springer Financial and Investment Advisor Representative of Thurston Springer Advisors. Securities offered through Thurston Springer Financial, Member FINRA, SIPC. Advisory services offered through Thurston Springer Advisors, an SEC Registered Investment Advisor. Alpha Pointe Capital is a DBA of Thurston Springer Financial and Thurston Springer Advisors.