Sell in May and Run Away? This expression is a myth as it assumes that North American Equity frequently move lower from May to September. One important recurring event influences equity markets every four years, the U.S Presidential election. During that year, North American equity markets have a history of moving lower after end of April, building a bsae in June and July and moving higher into early September. By early September, equity markets usually are slightly higher than the end of April. In April, traders respond to a ramp up of political rhetoric between the two presidential candidates that raises questions about future economic policy.
When equity markets are ready to predict the Presidential winner in July regardless of the candidate, equity markets recover, move higher into early September and record additional gains after the next President is elected. This year, political rhetoric between Obama and Romney already has started to ramp up. A word of caution! A tight race between now and September could preclude the traditional recovery in equity markets after the end of July.
North American equity markets entered into a corrective phase earlier than usual this Presidential election year. U.S. equity indices peaked on April 2 and have trended lower since then. Moreover, U.S. data released last week suggests that a recent growth spurt in the U.S. economy has stalled. In addition, investors frequently are responding to first quarter reports released by selling on news. Downside risk between now and July is significant.
Preferred strategy is to protect the value of your portfolio between now and July either by taking profits or holding defensive stocks that are not related to the main index. World Stock Markets will not crash all the way down. What we will be having is just a big market correction as we still have 2 years of bull run to go. But bear in mind that this bull run will not be a hyper-active bull run. This is just a slow and steady bull run. Which brings us back on standing strong on our sectors and stocks selection earlier this year. Avoid Blue Chip Stocks and Focus on Small-Caps and Penny Stocks. Only selected Blue Chip Stocks are advised to hold such as Consumer Sector Stocks.
World Market Indices Outlook for the month of May
Majority of the World Indices are still in the Long-Term-Bull run using the EMA30,90,200days Long Term Trend Technique. Any sell-off in the near future will just be a market correction as long the Long-Term-Bull Trend did not get violated. Investors and Traders should do their homework to start picking which sector of stocks to look into, as during the 2nd half of year 2012 will be having a very bullish bull run happening around the world and China Market is the one we should observe to kick start the Bull Rally. But still the 2nd half bull run doesn’t mean blue chips stocks are all in your watch list. Small Caps Stocks, Technology Stocks, Plantation Stocks, and Penny Stocks are the sectors we should always monitor closely and ride on their Bull Trend.
(U.S Dow Jones Industrial)
(U.S NASDAQ Composite)
(HK Hang Seng Index)
(SINGAPORE Straits Times Index)
(Shanghai Stock Exchange)
(Malaysia FBMKLCI Index)