Stocks have soared this year, prompting investors to wonder whether to “sell in May and walk away.” “With stocks at all-time highs, some investors may be tempted to follow the old adage,” wrote a team of strategists from UBS Group’s global wealth management division in a note on Friday.
The technology sector now accounts for 27% of the S&P 500, or much more than the 8% weighting of the MSCI Europe index, according to UBS. For that reason, investors who tried to sync the benchmark of US equities for “seasonal reasons” would have lost the outperformance of growth stocks in the bull market since the global financial crisis of 2008-09. Using the past as a guide, the UBS team recommends staying invested, even if they also point to historical evidence in Europe that supported a sell strategy in May. For the past 15 years, returns in Europe have been negative in June 80% of the time, according to the report. “This has helped a sales strategy in May outperform a stay strategy invested during those years,” the strategists said. Read: Dow closes lower after choppy week of earnings, but records gains for 3 consecutive months Meanwhile, the US stock market has risen to all-time highs this year, even recently this week as measured for the S&P 500 SPX, – 0.72% and Dow Jones Industrial Average DJIA, -0.54% benchmarks. The S&P 500 rose to a record 4,211.47 on April 29, for example, and was up 11.3% this year as of Friday’s close. “We are now entering a time of year where stocks have historically had a harder time moving forward,” according to the UBS report. “With many stock indices hitting new highs, some sentiment measures that appear widespread, and ongoing concerns about the spread of new variants of COVID-19,” some investors may be contemplating selling. Billionaire investor Leon Cooperman, who describes himself as a “fully invested bear,” told CNBC on Friday that he has “an eye on the exit” given the next expected tax hike, inflation and a ” reasonably valued market “. Ryan Detrick, chief market strategist at LPL Financial, blogged on Friday that the six months from May to October have been “some of the weakest months of the year for stocks” in the last 10 years. “But with an accommodative Fed, fiscal and monetary policy, coupled with an economy that is opening faster than almost anyone expected, we would use any weakness as an opportunity to increase positions,” he said.
“Here’s the catch,” Detrick said. “Inventories have actually been higher during these worst months of the year eight of the last ten years.”