The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.By Frank Holmes NEW YORK ( U.S. Global Investors) -- One catchy investing maxim that's popular at this time of year is "Sell in May and go away," which urges investors to cash in their holdings and take off the summer.
More importantly, the U.S. housing sector continues to improve. The ISI Group's homebuilders survey is currently at 50.4, nearly 40% higher than a year ago. Building permits are 35% higher, and the number of housing starts is 3% higher than a year ago, according to Credit Suisse. Sales of existing homes are up 5% on a year-over-year basis. Credit Suisse says, "The supply of existing one-family homes has fallen from a peak of 11.5 months in July 2010 to 6.3 months in March (in line with the 20-year average)." ISI Group says an improvement in housing is important because it lifts consumer net worth and employment, which lead to rising consumer confidence. Housing accounts for a bit more than 2% of U.S. GDP, but roughly 27% of household wealth, according to Credit Suisse.
U.S. companies aren't the only ones reporting stronger results. The chart above, from Credit Suisse, shows earnings momentum is strengthening around the world based on 12-month forward earnings per share estimates for the MSCI ACWI (All Company World Index). This is the opposite of what we experienced in 2011.
This is also a presidential election year in the U.S., which has historically produced positive returns. Since 1972, the stock market has rallied in five of the eight election years, according to J.P. Morgan, with market gains of 12% to 26%. Only during recession years (2000 and 2008) did the S&P 500 provide negative returns. Last week, Bank of America/Merrill Lynch suggested "investors position for an economic upturn" by increasing their exposure to equities. The firm's Global Wave indicator, a compilation of seven global metrics designed to provide a comprehensive assessment of trends in global economic activity, was signaling a trough in the global cycle. According to Bank of America/Merrill Lynch's research, the MSCI ACWI (All Country World Index) averages a 14.2% increase for the 12 months following a trough in the Global Wave. Historically, the index has experienced a positive return 86% of the time. Instead of "selling in May and going away" for the summer in 2012, we think investors should look to global stock markets and ride the global wave. U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients. To read more of Frank's insights, follow his blog "Frank Talk" at www.usfunds.com/franktalk. You can also sign up to be notified when a new entry has been posted at http://www.usfunds.com/subscribe/FTSubscribe.cfm. The MSCI ACWI (All Country World Index) Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The following securities mentioned in the article were held by one or more of U.S. Global Investors Fund as of March 31, 2012: Nasdaq OMX Group, Exxon Mobil.