Since 1950, the S&P 500 has compounded at an average rate of just 50 basis points (0.5%) over the May-September period. Granted, the season only represents averages and the "sell in May" strategy has many flaws, particularly after a large-scale correction occurs early in the period. Still, what are the probable outcomes after a 10%-11% year-to-date rally?
The best portfolio moves over the coming half-year period will involve both growth and income.
First, pursue reasonably priced ETFs with desirable monthly or quarterly income streams. Second, buy non-cyclical stock weakness on pullbacks of at least 5% to10%. (Note: Be sure that you understand the circumstances under which you might protect against further downside rather than doggedly hold onto the idea that the world's central banks have the cure-all to kill any bearish collapse in confidence.)
Income ETFs that one could use in the May-September period? I am fond of the low duration-oriented Pimco 0-5 Year High Yield (HYS) with its annualized 5.1% distributed monthly.I also believe that Powershares Emerging Market Sovereign Debt (PCY) is destined to reclaim its price highs while simultaneously offering an admirable annualized 4.8% distributed monthly. Also, I see a probable 6% annualized out of Market Vectors Preferred excl Financials (PFXF). My criteria for equity ETFs is slightly different. First, you should be looking to purchase on a legitimate pullback. Otherwise, you are risking the high likelihood of price depreciation in the early stages of your acquisition. Next, if you are purchasing in the May-September cycle, it is preferable to concentrate on assets less tethered to economic growth. Some of my "faves" include Global X Super Dividend (SDIV), iShares Emerging Market Minimum Volatility (EEMV) and WisdomTree Equity Income (DHS). Follow @etfexpert This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV