Yale & Jeff Hirsch
About the Editor Jeff is editor in chief of the Almanac Investor newsletter Stock Trader's Almanac, StockTradersAlmanac.com, and the Hirsch Organization. He makes frequent appearances on CNBC, CC, Fox, and Bloomberg. Yale Hirsch is founder of the Stock Trader’s Almanac.
Technically, today is just the sixth trading day of the “Worst Six Months”, May to October and depending on the index chosen, it has been down three, four, or in the case of the DJIA, five of these days. In all years since 1985, May has been the fourth best performing month advancing in seventeen of the last twenty-seven years with an average gain of 1.4% on the DJIA. Considering these statistics alone, a strong case for not selling in May could be made and has been made by others in the investment community, but not me. A more comprehensive review of history, that includes the influence of the four-year presidential election cycle, revealed a less impressive May track record in which DJIA has declined in eight of the past fifteen election years for an average loss of 0.4%. As research progressed, it was shown that although the DJIA has advanced nine times in election years from May to October, the average gain was a paltry 0.1% during those six months. So although corporate earnings were better than expected in the first quarter (when the bulk of this year’s gains occurred), economic data has since reversed trend and economic worries, here and abroad, have grown. U.S. Q1 GDP came in well below expectations, monthly payroll gains have decelerated greatly, and Europe’s debt woes have returned to the main stage following elections in France and Greece. Taking into consideration the track record of previous “Worst Six Months” in election years since 1950, the deterioration of economic data, and a shifting political landscape in Europe, a spot on the sidelines this summer simply makes sense at this time.
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