One of the best known investment axioms is to “sell in May and go away.” This is largely because these six months have historically been some of the worst six months of the year. As you can see below, the next six months have tended to be on the weak side.
As shown in the LPL Chart of the Day, the next six months have indeed been the worst six months of the year, up only 1.5% on average. To add injury to insult, we are leaving the six most bullish months of the year.
“Stocks are up more than 30% from the March lows, suggesting a well-deserved pullback during these troublesome months is quite possible,” explained LPL Financial Senior Market Strategist Ryan Detrick.
Here’s the catch, stocks have actually been higher during these worst months of the year seven of the past eight years.
Right here and now we’d be careful after the record run stocks have seen, as a well-deserved break could be perfectly warranted. But with the dual benefits of record monetary and fiscal stimulus helping to bridge those most impacted by COVID-19, we continue to expect this recession to be one of the shortest on record and a much stronger economy later in 2020.
For more of our analysts' thoughts on negative oil, the record stock rally, and earnings season, check out the latest LPL Market Signals Podcast.
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