By Jane Edmondson The adage "Go Away in May" is still in play, especially this year given the prospect that the US Federal Reserve may raise interest rates soon. The "go away” crowd recommends that investors reduce their market exposure in May, ahead of the summer doldrums and return to the market in the fall. One is selling not necessarily to avoid losses, but rather because there is not much to gain in this lower volume period.
Historically, there is evidence that the stock market does indeed languish in the summer months from May to September. FBN Securities analyst JC O'Hara ran the data over the last 20 years for the S&P 500 Index and charted the returns. Historically, performance for the summer months was negative. Of course, this doesn't work every year. And the chart clearly demonstrates, just staying long throughout the year, and not trying to time the market, is a pretty effective strategy as well.
So far this year, the best two places to be in the market have been the NASDAQ Composite and in Mid Cap stocks. The NASDAQ finally broke above the 5,000 level for the first time since March of 2000. One big reason for the more than 5% advance in the NASDAQ Composite this year is Apple (AAPL) stock. This biggest name in the index has gained more than 15% YTD through April. Here's what is driving returns in mid-cap stocks: solid fundamental results.
According to analysis by Bank of America-Merrill Lynch, with nearly 60% of Mid Cap stocks reporting, earnings season has gone pretty well in Mid Cap land.