Sell in May and Go Away?

The long standing market cliche (for short-term trading) suggests a summer break, with a return to the market in October or thereabouts.

It has not really been statistically accurate over the years.

The last couple have certainly been "break-even" propositions at best, although buying in October has ended well for most investors as markets have fared well into the end of the year:

The S&P 500 is currently breaking out of its recent consolidation, through the February highs, likely because traders are getting more comfortable with Q1 earnings announcements:

• 201 companies (of the S&P 500) have reported thus far and 73% have reported earnings above the mean estimate.
• Earnings estimates at March 31 were for a 4.6% decline.
• They have now been revised to a 2.8% decline.

• Financial market expectations for an interest rate increase by the US Federal Reserve remain mixed, with most calling for a September hike by .25%.
• The Fed will conclude a 2 day meeting on Wednesday of this week. As per usual, there will be much interest in the wording of the Federal Open Market Committee (FOMC) statement which will follow the meeting (2pm).
• Concern remains over the impact of the stronger $US on the US economy.
• If the negative impacts continue to be felt, the Fed may hold off on raising rates.

The S&P 500 remains "pricey", with the 12 month forward Price to Earnings (P/E) ratio at 17.1.

The 10 year average is 14.1.

• Low interest rates (globally) have increased investor appetite for riskier assets as they chase (potentially) higher  returns and abandon safer (yet lower yield/growth) assets.
•  On this note, we continue to take a cautious stance, although technical, short-term indicators are looking more positive.

So...perhaps don't sell in May, but look for a better buying opportunity in September /October.