What’s Going On Here?Swiss investment bank UBS has warned that the old adage, “Sell in May and go away” until the fall is not the right strategy this year. Do you copy? What Does This Mean?Here’s the thing, investors who heeded the saying last year might’ve been right to do so: they’d have avoided the second-worst May for US stock markets since the 1960s, in which a record $20 billion was withdrawn from the American exchange-traded funds that track stocks. But the long-standing mantra isn’t watertight at the best of times. If, for instance, you’d sold in May and gone away until the last few months of 2018, you’d have seen the year’s stock market gains evaporate and then some. And let’s face it, these aren’t the best of times, so UBS prefers a new truism for the months ahead. Why Should I Care?For you personally: Wise guys.
“Buy in May and, er, keep a watchful eye on your investments,” reckons UBS Wealth. Its advisers think that with interest rates as low as they currently are, investors who do want to sell are better off buying bonds and stocks instead of sitting on low-returning cash. They’ve also suggested you buy in installments (a.k.a. dollar-cost averaging) and focus on trends likely to be boosted by coronavirus disruptions – ecommerce, fintech, automation, and robotics, to name a few – as well as stocks in more stable industries like consumer staples (tweet this).
For markets: While the cat’s away.
There may be fewer investors around to buy and sell stocks, bonds, and other assets for the next few months in any case, which means those who do stick around will have a more significant effect on prices. Typically, that results in bigger swings in both directions as they respond to unexpected headlines and earnings updates – and try to pocket profits while the others aren’t paying close attention. | 