Monday, April 27, 2015
Stock Market: Don`t Sell In May - 2015 Edition
Since the end of April 2013 the US stock market (represented by the S&P 500) gained around 13% and it climbed more than 30% since end of April 2012. And in the long run the stock market has been gaining 7% per year on average.
The slogan also is self-defeating. If many follow and sell in May, their sales would set the stock market under pressure and stocks would become significantly cheaper. When the "May-sellers" come back to the market - say by the autumn - their purchases would lift stock prices again. Following stubbornly the "sell in May" proposal would therefore implement to sell cheap and to buy expensive.
I believe that the stock market will continue his upwards trend. Many are too skeptical (bearish) and are underinvested. They will experience a growing performance pressure.
Inflation & interest rates are at record lows (even if the Fed could start hiking her interest rates in June). Companies are reducing costs & debts, getting more efficient & productive. I assume that in the coming months companies will respond to economic growth and their expanding markets. They will lift wages more than in recent years in oder to gain manpower for their expansion (Wal-Mart`s wage hike could be the starting signal). Therefore the growth of personal incomes in the US will accelerate fueling consumer demand.
The global economy is getting a lot of tailwinds from cheaper commodities. The sharp price drops for oil, industrial metals and some agricultures work like a gigantic tax cut. Companies have lower costs, meaning more money to invest (including into a rising labor force), and consumers have more money in their wallets. More jobs, faster rising wages and much cheaper gasoline should speed up consumer spending in the US significantly which will boost the global economy (US imports = rising European & Asian exports).
Stocks should also get tailwinds from a new industrial revolution which is now going on: Rapid advances in 3D-printing, robotics, nano-technology, bioengineering (new medicaments) and more industries are working together and are reducing costs, opening new markets and making our lives better. And: The number of Internet users - and hours & money spend online - is worldwide exploding thanks to cheap smartphones and other devices which give access to the worldwide net. Thus I believe that the bull market which started in spring 2009 has many years to go. Don´t sell in May.