Investors should take advantage of the relatively slow pace in U.S. markets to prepare for unexpected moves this summer, panelists at the TheStreet's May Trading Strategies roundtable said.
Peter Tchir, an expert on fixed income, said that summer can be deceptively quiet -- but that recent summers saw U.S. government debt downgraded, China devalue its currency and in 2007, all of the global financial system's problems begin to leaking out. "I think summer's a particularly dangerous time if we're complacent, because there is less liquidity," Tchir said.
Douglas Borthwick, managing director of foreign-exchange firm Chapdelaine FX, agreed. "This is a spring of prepping, and you should be prepping for what I believe will be some [bad] events over the summer," Borthwick said. "I'd much rather set up positions now for a market piece of information that's going to change things to the negative just because it 'smells' so much like 2007."
Precious-metals expert David Yoe Williams Jr. warned that "since 2009, the gate has been wide and we've all gone into the equity markets [and] bonds. But when it's time to leave that trade, it's a very narrow exit, and if somebody yelled "Fire!" and you're racing for that, the place [will be] jammed and you can't get out."
Panel members also noted that Wall Street has changed a lot since the 2008-2009 financial crisis. "There's a lot of guys in this industry who were not around 10 years ago and don't have the experience," Williams said.
Trading Strategies: Sell in May and Go Away?:
- Complete May Trading Strategies roundtable video
- When Exactly to 'Sell in May and Go Away'
- 'Sell in May and Go Away' Won't Work for Gold
- Sell in May and Go Away ... Into These 4 Alternatives
- Sarge: I'm Not 'Selling in May and Going Away'
- Complete Coverage: Should You 'Sell in May and Go Away?
Editors' pick: Originally published May 12.