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Sell in March and Go Away?


One year ago today, the S&P 500 was up 6% for the year, and 28% over the prior 6 months. Investors were happy, but nervous. Calls for a correction were widespread, and a little early. The top of the market didn't come until May 2nd in 2011, and it wouldn't be topped again for the next 9 months.

Compare that to this year, where we've now gained 8.6% on the S&P 500 year-to-date, and are up about 28% from the recent lows, but this time in only 5 months. While it's impossible to say where and when the top of 2012 will be, calls for a correction are rampant again, and investors small and large eagerly await a dip and chance to deploy cash.

"We're looking for those days where the market might pull back to add to our positions," says Kim Caughey Forrest, VP and Sr. analyst at Fort Pitt Capital Group in the attached video. While she wants - and expects - a pullback, she readily concedes that rallies don't just die of old age; an "exogenous event" is what will likely take this market down.

Last year the selling was brought on by growing concerns about a double dip recession after the Japanese earthquake, tsunami and nuclear meltdown, as well as fears that Europe was about to become the next Lehman Brothers. Even though neither prediction turned out to be correct, the market took investors on a six month ride of pain.

Interestingly, one year later, recession concerns have all but disappeared from the list of likely triggers, though fears about Europe are still with us, albeit waning by the week.

"I think they've backed them (European banks and sovereigns) off the precipice, but like the U.S., they really haven't fixed any problems," Caughey-Forrest says. "What they're doing is essentially giving free money away to the banks and hoping over time, that those bad loans will roll off."

As much as the Dow, S&P 500 and Nasdaq indexes refuse to buckle, there are other signs that fear is trying to make a comeback and put greed back in its place. Notably, a clear uptick in demand for Treasuries with the 10 year yield below 2% again, as well as the conspicuous under-performance of the Transports (^DJT), which are suddenly lagging at a time when they're supposed to be leading.

Caughey-Forrest, and countless other fund managers like her can't say for sure whether the looming pullback will come in March, but they're counting on one thing: "there's still money to be made in stocks."