This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Sell in May, Many Fund Managers Say

NEW YORK (TheStreet) -- Many fund managers are advocating the "sell in May and go away" philosophy amid a lackluster backdrop for earnings, mixed economic data and lingering geopolitical risks.

They point to high expectations for a rebound in economic data, with bad weather blamed for a mere 0.1% rise in GDP during the first quarter. Earnings continue to be mixed, with negative forward guidance.

Historical evidence for the "sell in May" concept which advocates returning to markets in November, seems compelling. In 2010, the euro debt crisis took hold, while in 2011 the Portugal and Greek crisis hit headlines. In 2012, fears that Greece would exit the euro triggered falls, while Federal Reserve taper concerns dampened sentiment last year. 

This year, fund managers point to domestic earnings and economic data rather than a macro-crisis as reason to consider selling.

RidgeWorth Investments director of asset allocation, Alan Gayle, said the market was willing to ignore economic weakness in the first quarter but that pressure was now on for data to shine.

"The question is whether the economy is as strong as investors are hoping for, and if it's not, there could be pressure on markets," he said in a phone interview. Gayle said he suspects this is likely in the short-term. "The economy will continue to do well and markets will finish higher this year, but we've cut our allocation to equities and put more money in bonds," he said.

Chase Investment Counsel chief investment officer, Edward Painvin, is also cautious. "Earnings are not as robust as they need to be and we're in a mature bull market," he said in a phone interview. "It warrants more caution and it's harder to find attractive valuations."

Some are more optimistic. Walter Todd, Greenwood Capital chief investment officer, said anecdotal evidence around higher activity in the transport goods sector (which is linked in a growing economy) suggested a strong economic rebound.

"It points to a big bounce in the near term, and we think we'll get strong economic numbers going forward even as earnings are hit or miss," he said. Todd said markets would continue to trend sideways for another month until economic data was unsullied by the harsh winter.

"As far as earnings, investors are shooting first and asking questions later," he said, referring to large intraday swings in markets. Other fund mangersed warn that investors who sell around May risk lacking the discipline to buy back into equities if markets have a subsequent choppy period.

Bank of America analysts expect a bigger 10% to 15% correction in autumn, as Federal Reserve stimulus ends and rate hike expectations grow.

"Bull markets don't end with such high cash and low leverage," chief investment strategist Michael Hartnett told clients, referring to current market conditions. "Bears looking for a big 10-15% correction should wait until September and then buy volatility and raise cash as Fed QE ends and rate hike expectations grow at the FOMC meetings of Sept 17th and Oct 29th."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs