Here we are, post-Memorial Day already. I am wondering about the application of the old saying, “Sell in May and go away.”



If you had sold early in the month, you would have missed out on some excellent gains. But it is still May through this Friday, so it still could hold some wisdom.

  Here we are, post-Memorial Day already. I am wondering about the application of the old saying, “Sell in May and go away.”

If you had sold early in the month, you would have missed out on some excellent gains. But it is still May through this Friday, so it still could hold some wisdom.

Through mid-afternoon Tuesday, the major stock indexes are all higher month to date. The Nasdaq twins, the 100 and the Composite, are up by more than 4.5 percent. The S&P 500 and the Dow Jones 30 Industrials are almost twins, both higher by 3.9 percent. Perhaps this does help create a wealth effect. Between stocks and major US city housing prices rising, the Conference Board reported that consumer confidence reached a five-year high.

But still, statistically, April ends the best six months for stocks since 1950. According to the Stock Trader’s Almanac (John Wiley & Sons, 2013), through 2011 the average percentage gain during the period of November through April is 7.5, while the same average gain from May 1 through Halloween is only 0.3. Therefore, one suggested strategy is to switch from stocks to fixed-income (bonds, CD’s, etc.) for the summer and early fall time period.

If one were tempted to follow that, even after gaining another few percent in stocks during May, where would one go? Although no one is too excited about losing money in CD’s after subtracting inflation, many folks have thousands of dollars in them or money market funds. And despite Fed Chairman Bernanke’s best jawboning, the value of 10-year and 30-year treasury bonds have begun their value slide.

I have been warning that bond yields would have to rise at some point, and you might be sick of hearing about it. But are major media pointing out that the yield on the 10-year government bond has risen from 1.39 percent per year to 2.13? That is a jump of 52 percent in 11 months! The 30-year bond rate is a mere 33 percent higher. In simple terms, this means the value of existing bonds will be moving downward too.

In spite of this movement, there is little evidence so far that Mr. and Mrs. Hometown Investor are selling their bonds and buying stocks. That usually takes a while for folks to catch on. When it does, it will be ugly for a long time. We have been in a bond bull market since 1981. Before that October, we had a U.S. government bond bear market for more than 30 years.

This is why it is so important to know there are thousands of choices for investing your money today. Not all are suitable for every investor, but I am not including the usual wild, crazy and dumb opportunities to buy into the latest Ponzi scheme.

For example, just looking at the universe of foreign country iShares ETF’s (exchange traded funds) sponsored now by BlackRock, the following are at least 15 percent higher in the past six months: Belgium, Denmark, France, Indonesia, Japan, the Netherlands, Philippines, Sweden and Switzerland. It has never before been so inexpensive and relatively easy for investors to put their money to work anywhere in the world that welcomes capital and rewards it appropriately.

(Past performance is no guarantee of future results. Performance data from Worden Brothers, Inc., TeleChart software, 2013, through 3:37 EST.)



Ron Finke is president of Stewardship Capital in Independence. He is a registered investment adviser. Reach him at rcfinke@stewcap.com.