Interesting to see some of the "optimistic" outlooks starting to surface just a teeny bit above. Some of the media pundits are playing both sides of the fence it appears. Notice how quickly they will revert with a known earnings miss or any little report. This just proves what many of us have said all along....noise, just noise for investors. As I have said, we need to hold the line and just keep "winning" some of these areas a piece at a time. Each time we do, it puts us a little further down the road. So far, we have been "sneaking" out of the valley, and quietly holding our own.
HERE IS MY PORTFOLIO. I repeat this post every so often for the benefit of any new readers or posters. I have no plans to sell anything or do anything. As a long term....fully invested all the time investor......I will do nothing in response to the current short term events and environment. "AS USUAL.........HERE is my current PORTFOLIO MODEL. I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc. PORTFOLIO MODEL "Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 60% of the total portfolio and the fund side at about 40% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing. As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio.At the same time the funds double and triple up on my individual stock holdings............that I consider the BEST individual businesses in the WORLD. STOCKS: Alphabet Inc Amazon Apple Costco Home Depot Honeywell Microsoft Nike Nvidia Tesla MUTUAL FUNDS: SP500 Index Fund Fidelity Contra Fund CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (73). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)" MY COMMENT This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my ten stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis."
Another company that has been around awhile gets in a beat on earnings. Coca-Cola Reports First Quarter 2023 Results (KO).
I like this little article. Ken Fisher: Don’t believe this myth about bond yields and stock prices https://www.theglobeandmail.com/inv.../article-higher-bond-yields-dont-sink-stocks/ (BOLD is my opinion OR what I consider important content) "Beware rising bond yields! For over a decade, bears claimed puny interest rates were the sole reason stocks soared, saying investors had no viable alternative. They see global central banks’ rate hikes ending that. Fallout from failures atCredit Suisse and U.S. regional banksfurther fan those fears. But such thinking is folly. Interest rates don’t rule stocks. Here is why. That higher bond yields stymie stocks presumes these two fight for some singular pile of funds. On one side: bond yields, like Canadian 10-year rates, which are currently yielding about 3 per cent. On the other: stocks’ earnings yield – the inverse of the price/earnings ratio, (the earnings return shareholders would get forever if earnings and price remain constant.) Conventional wisdom holds stocks’ earnings yield must reasonably exceed Treasury yields to be worth their volatility. Nice theory. In reality, real, inflation-adjusted earnings grow over time with the economy. Businesses expand and innovate. But inflation also increases nominal earnings on top of gains in real earnings. En route, profits wiggle and waggle, plunge and soar. Business-cycle volatility makes earnings yields especially prone to skew around market lows and early in new bull markets, which is where I think we are now. Why? Stocks look forward, while earnings look backward. Analysts’ earnings projections always skew lower when the recent past stinks. That’s human nature. Look no further than the S&P 500′s flat EPS growth projection in 2023, and Canadian stocks’ negative 4.5-per-cent projection, as profits from energy stocks face tough comparisons with previous earnings. Early in bull markets, you get a lower “E” and higher “P,” briefly squishing earnings yields (and inflating most other valuation metrics). Hence, spreads between stock and bond yields hold irregular predictive power. Take the bull market of the early-2000s: In the United States, the average gap between 10-year Treasuries and the S&P 500′s earnings yield using projected earnings was 2.23 percentage points through its entire stretch – near today’s much-feared 1.89-percentage-point spread. U.S. stocks didn’t mind. They rose 121 per cent in U.S. dollars. High bond yields don’t thwart bull markets, either. Consider the United States in the 1980s and 1990s. During the entire two-decade stretch, 10-year U.S. Treasury yields topped 4 per cent. They were over 10 per cent for more than half of the 1980s. U.S. stocks still soared 400 per cent in the 80s and another 433 per cent in the 90s, in U.S. dollars. In those two decades, Canadian 10-year yields averaged 11.5 per cent and 7.6 per cent, respectively, while Canadian stocks surged 197 per cent and 220 per cent. How can stocks soar when “safer” bonds yield similarly, or more? Unlike bonds held to maturity, stock returns aren’t capped by coupon rates. They benefit from economic growth and innovation – with no ceiling. They also pay dividends. If management foresees earnings growth, they can borrow, buy back shares and retire them – soaking up supply while increasing earnings per share and juicing returns. That is happening now, largely unseen. Bonds can’t do any of that. And, if long interest rates rise further, the prices of existing bonds fall. And so, what is the impact of inflation? Bond yields reflect inflation expectations. When yields are higher, inflation is likely elevated – as it is now – eroding coupon rates that are considered big. But companies can pass on cost pressures, so shares fare better with time. Yes, stocks sank as inflation soared last year, but this was mostly sentiment. Consider the fact that the gross profit margins of S&P 500 and Canadian companies ended 2022 at 33 per cent and 27.3 per cent, respectively, near 2021′s year-end 33.6 per cent and 26.5 per cent. Plus, the 2022 plunge in bond prices largely mirrored that of stocks. Still, some say central bank hikes are the real threat, pointing to Canadian stocks’ decline after the Bank of Canada started raising rates last March. Canadian stocks bottomed out the same day as a rate hike in July, and have climbed since, despite four more hikes. The S&P 500 sits 1 per cent below levels prior to the Federal Reserve’s series of rate increases, rallying amid hikes since October. The shock is gone. The equity bears can’t see it. None of this means interest rates don’t affect economies – they do. Or that earnings yield comparisons lack all utility. There is a time when they are valid, but rarely, and when few perceive it. For example, high bond yields plus unexpected earnings growth delivers an increase in earnings yields, especially if rates then fall unexpectedly. But rates don’t dictate stock direction. The proof? The correlation between Canadian stocks and 10-year bond yields is just 0.17 – frail, given 1.00 represents lockstep movement and minus-1.00 is the opposite. The S&P 500 has a similarly flimsy 0.24 correlation with 10-year Treasuries. Despite this, large-scale rate fretting persists, showing sentiment is still snarkily pessimistic, as most observers hunt for negatives that are sure to stomp stocks. Such fixation on false fears is bullish – always." MY COMMENT There is a lot of FANTASY information being floated out there now regarding interest rates and stocks. Much of it is simply IGNORANCE. It takes on a life ot it's own and is repeated over and over and over. That does not make it true. A perfect example is the BS about the BIG TECH companies being so sensitive to interest rate hikes. BALONEY. The primary impact of this fantasy information is on investor sentiment. Sentiment does not care if something is true or not....it simply reflects the public and professional opinions of investors and others. It has NOTHING to do with REALITY. It makes no difference if something that is driving sentiment is true or not.
Yes....it really is this simple. Two Key Traits Every Investor Needs https://investorplace.com/smartmoney/2023/04/two-key-traits-every-investor-needs/ (BOLD is my opinion OR what I consider important content) "There’s a philosophy that just about everyone knows in the investing world: Buy low, sell high. This strategy has succeeded brilliantly for decades, if not centuries. But it sounds so simplistic that it feels almost moronic… Yet few investors manage to achieve this objective consistently. Why is that? The answer relates to two key traits every investor needs: discipline and patience. Far too often, we buy too high… and then sell too low. We know what reason says we should do, but we follow our emotions. We lack the discipline and patience necessary to forego ordinary investment opportunities, while waiting for extraordinary ones. It’s like when you see a great TV at Best Buy – 4K, 75 inches, comes with a smart remote, fits in that dead space in the basement that your wife hates – for $850. You want to buy it… NOW. You don’t want to wait for a better price, even though you know Black Friday is just one week away. So you splurge on it… only to see it selling one week later for just $675… And you could have gotten a free wall mount as well! Obviously, we can never know exactly when cheap is cheap enough. But patience and discipline help us say “no” to marginal opportunities, while waiting for better ones. To outperform the market, an investor must maintain the discipline of saying “no” to bad risks. And then keep on doing that until good risks come along. Today, I have a new “good risk” to share with you… Just Say “No” Marginal opportunities are what I call “bad risks,” or “asymmetrical risks.” That’s when the potential upside is much smaller than the potential downside. Here’s an extreme example to illustrate the concept… Riding in a barrel over Niagara Falls for a $20 prize. If everything works out perfectly, you win $20. If not, you perish. Here’s another example… Running red lights to get to Disneyland 10 minutes early. If everything works out just right, you make it to the “Happiest Place on Earth” and have to wait 45 minutes instead of an hour for Space Mountain. Or you might get into a horrible accident. These examples of asymmetrical risk are so obvious that they seem ridiculous. But many asymmetrical risks are less obvious, like the TV example I gave earlier. Disciplined investors understand the dangers of these risks; that’s why they begin their analysis by asking “What can go wrong?” rather than “What can go right?” Disciplined investors understand that investing is optional and that they must be selective. It’s OK to say “no” to bad risks. Unfortunately, many investors grow impatient. We justify buying richly valued stocks by comparing them to stocks that are even more richly valued. But it is still dangerous to buy stocks that are “less risky.” It’s no different than camping 40 feet away from a pride of lions because a few other folks are camping only 20 feet away. You might wake up every morning 40 feet away from the lions, just like the morning before. But getting eaten is also possible, if not probable. Avoiding bad risks is the essential first step toward outperforming the market. Say “Yes” When a Truly Remarkable Opportunity Arises You cannot outperform the market by simply “buying the market.” You must take only the best risks and say “no” to all the others. Sometimes you have to wait a long time for truly superior investment opportunities to come along. But that’s okay – they’re worth the wait." MY COMMENT I practice this patience and discipline in my Portfolio Model. One of my primary factors to buy a stock is that it be a BIG CAP company......or.....a young company that is well on the way to being a big cap company. I prefer to simply wait till the handwriting is starting to appear on the wall regarding a company being DOMINANT. With small and young companies there is simply too much FAILURE. Every narrative sounds great.....IN THEORY. BUT reality is that of the huge numbers of......."best thing since sliced bread" companies......very few of them will become SPECIAL. I prefer to wait a bit before jumping into every....."next great thing"......stock. I want to see that a company is on a path to DOMINANCE before I put money into it. I want to know there is a nice....."probability.....that any stock I buy will be one that I can hold through a long period of growth.
We are still waiting for clear direction today....as the markets are now mixed after a better open earlier in the day. The short term at work. Basically the same open we have been seeing lately......flat and mixed. Stocks waver ahead of more heavyweight earnings https://finance.yahoo.com/news/stock-market-news-today-live-updates-april-24-2023-114926770.html (BOLD is my opinion OR what I consider important content) "U.S. stocks were mixed Monday, with the earnings calendar locked and loaded with heavyweights reporting in every sector. The S&P 500 (^GSPC) edged up by 0.13%, while the Dow Jones Industrial Average (^DJI) added 0.19%. The technology-heavy Nasdaq Composite (^IXIC) ticked down by 0.16% Government bonds fell. The yield on the 10-year note slid to 3.53%, while rate-sensitive two-year note yields also declined to 4.16% Monday morning. This week will bring a flood of earnings including several big tech companies— Microsoft (MSFT), Meta (META), Amazon (AMZN), and Alphabet (GOOGL) — whose shares have pushed the S&P to rally so far this year. Wall Street has been worried about a so-called earnings recession, with investors expecting a second-straight quarter of decline in profits from US companies. That has some strategists questioning if this year's market rally will run out of steam. So far, earnings season is off to a solid start, as about 68% have reported a beat on EPS so far, down from a record 90% last week, according to a note from Bank of America. Big bank earnings are in the rear view. But some regional lenders are still on tap, including First Republic Bank (FRC) reporting after the bell on Monday. Meanwhile, Credit Suisse Group AG (CS) reported Monday its last-ever quarterly results. Even after UBS (UBS) agreed to buy out the ailing bank in March, Credit Suisse depositors withdrew nearly $75 billion. Still, Wall Street remains concerned that the US economy will spiral into a recession as the Federal Reserve raises interest rates to cool inflation. Investors will be closely watching the first reading of Q1 GDP, out Thursday. Economists expect a 2.2% print, compared to a 2.6% in the last quarter of 2022. “It’s getting harder to find an economic indicator that’s saying the economy isn’t already in a recession right now let alone on the verge of one,” the team at Bespoke Investment Group wrote in a note on April 21. Other economic releases this week include consumer confidence, new home sales, durable goods orders, and the closely watched employment cost index. These will be the last big inflationary data points ahead of the Federal Open Market Committee's meeting next week. Separately, after the volatility in energy markets this year, Wall Street's attention will turn to some of the largest players by the end of next week in oil, including Exxon (XOM), Chevron (CVX), Valero (VLO), and TotalEnergies SE (TTE). Following four consecutive weeks of gains, crude oil retreated as data last week showed growing headwinds for the US economy. WTI Crude fell 5.63% for the week, while Brent crude broke a winning streak streak to finish down 5.39% on the week. In single-stock moves, Bed Bath & Beyond Inc. (BBBY) filed for bankruptcy. The home goods seller and erstwhile meme-stock darling couldn’t raise enough money to stay afloat. Shares of the Coca-Cola Company (KO) rose after the beverage company reported first quarter global sales increased 5% in the first three months of the year to $10.98 billion, beating analyst expectations for $10.8 billion. Overall, the narrative that we're going into recession is "very seductive," Baird Managing Director and Market Strategist Michael Antonelli told Yahoo Finance Live. But he noted that "companies are still performing pretty well." Koninklijke Philips N.V. (PHIA.AS) shares surged after the Dutch health technology company Royal Philips announced it has set aside funds to cover possible litigation costs in the US related to the recall of 5.5 million faulty medical devices. Shares of Sociedad Química y Minera de Chile S.A. (SQM) jumped following the Chilean’s President Gabriel Boric announcement on Friday of a new state-led strategy to develop its vast resources of lithium, which is vital for the development of electric vehicles." MY COMMENT I like one little blurb in this article......something we were NOT told last week: "...earnings season is off to a solid start, as about 68% have reported a beat on EPS so far, down from a record 90% last week..." So last week earnings beats stood at.......90%, a RECORD....? Why did we not hear about this? I dont recall ever seeing anything about record earnings beats last week. I wonder why? In addition......I dont care at all if economic data or indicators are signaling a recession. That is nothing more than someone's "opinion". In fact, I dont even care if it is true. A recession, especially a mild one......is not the stock markets. I have seen many times when I did very nicely in the markets even though the general economy was not strong. SO.....I dont care what the so called experts are predicting about recession.....or....anything else for that matter.
We are seeing yet another consumer conglomerate doing a split-up.....no doubt under the banner of creating shareholder value. Well......actually.....creating shareholder value for the executives and for some very small percentage of big shareholders that will move on when the split-up happens. It is RIDICULOUS that these sorts of ICONIC companies are simply THROWING AWAY money and profits from a huge segment of their business. It is also ridiculous that these companies are throwing away multiple product lines and income streams. This STUFF is NOT smart business. This trend in business for the past 5-10 years does NOT create stronger companies. It simply creates one product companies that are much more volatile. In the older days J&J was the ONLY drug company that I would own. I never buy drug companies....they are volatile and erratic. But J&J was more a consumer conglomerate than a pure drug company. I liked that so I owned the stock for a long time. Johnson & Johnson consumer health unit valued at $40 billion ahead of IPO, report says https://www.cnbc.com/2023/04/24/jj-consumer-health-unit-valued-at-40-billion-for-ipo.html "Key Points The consumer health business of Johnson & Johnson is valued at $40 billion ahead of its initial public offering later this year, sources told The Wall Street Journal. Kenvue, the soon-to-be spinoff of J&J, aims to raise $3.5 billion or more in the offering. Kenvue plans to start meeting with prospective investors as early as this week, kicking off an IPO roadshow. The consumer health business makes Band-Aid bandages, skin care products under the brands Neutrogena and Aveeno, pain relief drug Tylenol and J&J baby powder. "
STILL a dull market today.....although the NASDAQ has gone further to the dark side as the morning progresses. Today is far from over and we will just have to sit and watch the markets settle in for the day. As usual there is NOTHING going on today in terms of the markets. We will have the earnings DRAMA later this week......so we will have to wait till Tuesday and Thursday to see how it all sorts out for the week.
Having looked for the first time.....I have a nice little LOSS today. Seven stocks DOWN and three UP. The UP stocks at this moment are.....GOOGL, HON, and COST. NKE and HD are teetering on a knife edge between being down or up....but are slightly down at this moment. I can see it ending up as a typical five up and five down day today by the end of the day. We continue with the usual market that we have been seeing for the past few weeks.....in other words.....move on, nothing to see here. it is kind of nice to be in a NOTHING market this year after all the DRAMA and CRASHING last year. A good transition year as we move forward with the BULL MARKET.....that everyone is trying to ignore or pretend does not exist. I love it.
As mentioned, earnings are pretty much full steam ahead from this point as a bunch of well known companies line up this week and forward on into the next few weeks. The train is leaving the station....all aboard.
I NOW have a gain as the market averages have continued to improve into the afternoon. The last 45 minutes will tell the story for the markets as we head to the close. I have improved from earlier in the day to.......six stocks UP and four stocks DOWN.
I have seen NOTHING about this.....but looking at the stock price for COSTCO this morning......$510.22.....my view is that they need to do a stock split. Either two for one or three for one. This company is doing very well and it would be a god time to do a split. Although my view on splits is sort of old fashioned. Many companies go way beyond where I would split a stock if it was up to me. The last time they did a split was in 2000. They have only......amazingly......done three splits in their corporate history.
A SMALL GAIN for me today. Actually I ended the day TIED with the SP500......+0.09% for the day. I will certainly take any gain over a down day any time....all day long. It all compounds over time. I ended with six stocks GREEN and four stocks RED. The RED were.....TSLA, AMZN, MSFT, and NVDA. A good start to the week.
Obviously the rest of the week is likely to be driven by the BIG earnings reports this week. We start things off with GOOGL and MSFT tomorrow.
"Turnout the lights, the parties over".......at least for today. Here is how the day ended today. Nasdaq closes lower Monday as investors prepare for Big Tech earnings https://www.cnbc.com/2023/04/23/stock-futures-inch-down-as-wall-street-awaits-tech-earnings.html (BOLD is my opinion OR what i consider important content) "The Nasdaq Composite slipped on Monday as investors awaited the release of a slew of corporate earnings reports from big technology companies and fresh economic data. The tech-heavy index slid 0.29% to close at 12,037.20. The Dow Jones Industrial Averageended up 66.44 points, or 0.2% to finish at 33,875.40 points. The S&P 500 closed 0.09% higher at 4,137.04. CNBC Wall Street is looking ahead to mega-cap tech earnings results this week in what will mark the halfway point of earnings season. Alphabet, Microsoft, Amazon and Meta are among the high-interest names scheduled to announce their results for the first quarter. “Everyone’s just waiting for tech earnings,” said Chris Harvey, head of equity strategy at Wells Fargo Securities. “This is a very, very busy week for earnings, so we’re just treading water.” But it may be difficult for tech stocks to rally on the back of financial reports after already advancing significantly this year, said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. Communication services and information technology stocks within the S&P 500 have posted the biggest year-to-date gains of the index’s 11 total sectors, adding more than 19% and 18%, respectively. “A lot of the good news is already in the price,” Zaccarelli said of tech stocks. “It’s going to take a lot more for tech earnings this week to really move the needle on the stock prices.” Roughly 76% of S&P 500 companies that have reported quarterly results through Monday morning beat analysts’ earnings estimates, according to FactSet data. However, first-quarter earnings for S&P 500 companies are estimated to decline an overall 5.2%, per Refinitiv. Investors are also keeping a close eye on new economic data that will provide insight into whether inflation is cooling and if the Federal Reserve will announce another rate hike at its next meeting in early May. GDP numbers for the first quarter and April’s consumer sentiment data are both among data points slated for release later in the week." MY COMMENT LOL......."a lot of good news is already priced in".......well WTF......we have had it pushed on us relentlessly for weeks now how bad the earnings were going to be. So how is this true? It is NICE that with HALF of all earnings in......the DIRE predictions have gone down in flames. BUMMER......for all the so called experts. I believe this is........EIGHT IN A ROW.......earnings reporting seasons that they have missed the trend and the direction of earnings. It simply.......DEFIES ALL PROBABILITY.....that with all their computing power, analysts, AI, knowledge, expertise etc, etc, etc.....that they could be so WRONG about earnings for EIGHT quarters in a row. A MONKEY could flip a coin and be right about half the time..........but NO.....not the EXPERTS. Remember the article I posted earlier that had the BEAT RATE at 69%......well suddenly here it is at 76%. That seems impossible even with data. Another aberration?
Well......I am still hanging in there so far this year. I am at year-to-date.....+17.11%. That could go up or take a hit this week depending on the four companies that I have doing earnings this week.....GOOGL, MSFT, AMZN, and HON. We STILL have eight months to go after this week till the results are "locked in" for 2023. So...plenty of time to improve or lose some of this gain. One thing is sure.....I feel a lot better at the end of April this year, compared to the same time last year. Much of the losses last year occurred in the first four months of the year. We are seeing the losses of last year DISAPPEAR in the results for the SP500. Just looking at various time periods of the SP500.....you would never know what last year was like at all. SP500: 1 MONTH +4.18% 3 MONTH +2.92% 6 MONTH +8.95% YTD +7.75% 1 YEAR (-3.15%) 3 YEAR +46.15% 5 YEAR +57.01% You can see that...even with the big loss last year......the SP500 for three years is averaging +15.38% per year. Way above the long term average. For five years the SP500 is averaging +11.40% .....a bit above the long term average. Keep in mind that these are NOT total return figures. Add in the dividends and you get even better numbers. If I did not live through last year......just looking at the above I would never know that we lost....... (18.11%)......in the SP500 last year. This is the POWER of LONG TERM INVESTING.
Impressive performance. You do the community a great service by sharing your holdings and your approach. Thank you.
Of course the media is all in on the MSFT and GOOG earnings coming up at the close and mostly negative about them. It's as if there were no other companies reporting good reports this morning. Part of me thinks they are attacking TECH because they have led the charge out of the valley so far this year and "they" just have to extinguish that narrative. Secondly, because we don't know the results yet, so it is always easy to pitch a little fear and speculation out there because it is unknown. They certainly can't harp much on the ones that have soundly beat at this point and it makes them look like fools for failing so miserably at their predictions.....again.
AMEN.....AMEN. I dont invest based on SUPERSTITION. May Is Just a Month, Not a Risk https://www.fisherinvestments.com/en-us/insights/market-commentary/may-is-just-a-month-not-a-risk (BOLD is my opinion OR what I consider important content) "Snappy seasonal sayings aren’t actionable. We are a week away from the month of May, but apparently it is never too early for the seasonal adage known as “Sell in May and Go Away” to hit headlines. It has started percolating over the last couple of weeks, perhaps because financial news has been rather quiet since last month’s banking tumult died down. For us, debunking the Sell in May myth has become an annual rite, and rest assured, we will take it down once again here. But more broadly, we think the arguments the topic has inspired thus far provide an interesting sentiment snapshot. For those of you who have managed to go through life without encountering Sell in May, one, we are envious and two, here is a brief synopsis: As the name suggests, it preaches getting out of stocks in late spring and staying out for a while. Traditionally, it referred only to the summer, on the theory that volatility was higher and liquidity and returns were lower while brokers were on holiday. Hence, sitting out of stocks between May and Britain’s St. Leger Stakes horse race in September would maximize the likelihood of avoiding summer vacation weirdness. But as finance became less upper-crust British and more data-heavy, it morphed into sitting out between April 30 and Halloween since that six month-stretch is the calendar’s weakest rolling six-month span. That is more or less the modern definition, although the original still flares up now and then. Sell in May, like most seasonal adages, works just often enough to stay in the zeitgeist—and nowhere near often enough to guide investment decisions. In the 97 completed April 30 – Halloween Sell in May windows since good S&P 500 data start in 1925, returns in that six-month stretch were negative 27 times.[ii] That equates to 27.8%, a little less than one-third of the time. If we were talking baseball batting averages, this would be decent enough to stay in the lineup. But for investing, a 27.8% success rate is dismal. It also makes selling in May defy basic logic, considering this stat means returns are positive 72.2% of the time. We have a hard time seeing good sense in automatically sitting out a stretch that—like stocks overall—is positive much more often than not. Those “weak” average returns are still positive, too—missing positive returns is not a good way to reap the magic of compound growth. To the investing world’s credit, we aren’t aware of any professional who actually preaches and practices rigid Selling in May and Going Away. It seems to be more of a lede to open a broader discussion of all the alleged fundamental and technical reasons to sell in the spring. We have seen a fair amount of that so far this year, which isn’t a shock. The rally since last October 12 looks more and more like a new bull market with each passing day, and what Fisher Investments founder and Executive Chairman Ken Fisher calls the “pessimism of disbelief” is a hallmark of young expansions. That is, people remain stuck in bearishness, perceive the rally as fools’ gold and seek reasons to justify their stance. This year, we have seen people cite high valuations, continued rate hikes, tighter liquidity after the collapse of Silicon Valley Bank and Signature Bank, tapped-out consumers and more. Some have suggested selling early to get out before everyone else does, lest their selling knocks stock prices and forces you to swallow a lower exit point. These are all the same fears that have dogged stocks for months—and in rate hikes’ case, since last year—just wearing a shiny new Sell in May wrapper. You can find our take on each of them here, here, here and here—in this context, we think their prevalence is simply an encouraging sign of sentiment. To be fair, we have also seen some analysts saying Selling in May risks missing a continued rally, so pessimism isn’t universal. And we must also point out that Sell in May worked last year. Had you sold April 30 and come back at market close on Halloween, you would have skipped an -8.1% MSCI World Index decline during that spell, re-entered 19 days after stocks bottomed and earned an 11.7% return from that day through Friday’s close.[iii] Perhaps it “works” again this year and there is a summertime swoon. But successful investing is a probabilities business, not a “perhaps” business. Moreover, short-term returns are unpredictable, full stop. Hence, we encourage investors to position their portfolios with the next 12 – 18 or more months in mind, not the next 3 or 6. That is a more reasonable timeframe to measure probabilities, as it allows enough time for the shorter-term wiggles to even out into a trend. If the highest likelihood is that the trend over this foreseeable future is a bull market, then we think it makes most sense to stay in stocks. That will mean participating in some short-term downside, whether during the Sell in May window or some other time, but it will likely also mean capturing the full bull market returns that occur cumulatively—returns that can then compound over the rest of this bull market and your entire time horizon." MY COMMENT Its your money......throw it away if you wish.
