Sell in May? No way!

Kevin Chupka

If you sold in May you better go away, these next two minutes could be unpleasant. With only hours to go in the trading month the S&P 500 (^GSPC) is up 1.9% for May and is sitting at record highs. While no where near peak levels, the Nasdaq (^IXIC) is up 3% for the month and Russell 2000 (^RUT), which spent the better part of April getting pistol whipped, has managed to spring into the green by 1%.

While perma-crashy Marc Faber spent the spring warning of a crash that could "be bigger than 1987," the stock market was making a decent looking base and pushing higher. The crash theory was based in part on the idea that the plunge in social media stocks like Twitter (TWTR) was a portent of doom for the overall tape. As it turned out, Twitter's 12% drop in May was a rather impressive example of the market behaving rationally and investors finding opportunity.

There are reasons for concern. There always are. GDP for the first quarter was negative. The retailers have reported generally lousy results. There are "international tensions." Don't ignore any of that but above all understand this: the most difficult part of informed investing is being able to understand and articulate the worst case scenario without hiding under the bed cradling a shotgun and a gold bar. The same could be said about life in general.

The easiest way to make a living as a hack pundit is to be scary. Often that involves evoking images of the '87 crash. That's good story-telling but what most people don't mention is that the S&P 500 was actually higher for 1987, despite the crash. Really. Stocks were up 2% in 1987, 12% and 1988 and more than 27% in 1989. Then, as now, there were investors sitting on the sidelines for fear of getting caught in the next crash. There is no great Investment truth on some matchbook cover or pundit newsletter. The world is complicated but it tends to turn out all right if you don't panic. Something to consider before you sell all your stocks for fear of a June swoon.

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