Sell in May … Go away? (TWTW – April 26-30, 2021)
Naturally, I am being cheeky with that title … wish it were that easy – don’t you?
Seasonality: For those of us who have been in the business a while (most of us, presumably …), the concept, or rationale behind it is that … perhaps once the weather improves (May 1st is here LOL and was it snow that I saw yesterday in Oakville Ontario?), and summer takes us away from the markets, nothing much can happen. In other words, we won’t miss much by having our $ sit on the sidelines while we enjoy traveling, the cottage, the beach, or … in Wall Street’s case, perhaps the Hamptons.
Will that be the case this year? Of course, there is still this capital P … the pandemic … continuing to represent a nasty headwind, although, in many parts of the world, reopening is squarely on the horizon. Beyond that, who knows, is the short answer! I don’t and can’t say I ever really took that path to invest in a meaningful way. You could, however, decide to reduce risk in your holdings, or maybe have a somewhat greater allocation to cash over the summer months than you otherwise would, but the all-in/all-out decision is generally best avoided…
Perhaps, just perhaps, this year, after the massive rebound from last year’s pandemic lows (March 23, 2020) – you could justify having a greater propensity to leave some $ sitting out of the markets. Remember, we’ve seen it before, China, for example, a few summers back caused a rather steep August sell-off … Anyway, enough of the topic – save for perhaps mentioning that if you’re looking for someone diligently applying the notion of being fully in the markets when seasonally tends to perform better (Oct-May) versus taking the foot off the accelerator during the period when that isn’t generally the case (May-Oct) … well, look at Brooke Thackray’s HAC (Horizons Seasonal Rotation ETF => Click HERE!).
Incidentally, what did Brooke have to say about the topic? As luck would have it, he tweeted about it on Friday:
“the stock market is transitioning into the “Sell in May” time of the year, where it has on average, over the long-term best to be more defensive. Still lots of sector opportunities.”
Respectively was quoted in the Globe and Mail about it:
“Brooke Thackray of @horizonsETFs points to sectors such as biotech, consumer staples, healthcare, utilities, REITs, government bonds, and Canadian banks, technology, and gold as opportunities in the “sell in May” period.
So there you have it for seasonality!
Earnings this past week – Obviously a slew of earnings in the US, with many giants, notably Facebook, Apple, and Amazon reporting this past week, (of the 303 companies in the S&P500 that have reported so far, 87% have topped analysts earnings estimates … ) and scores more to come. FB blew past expectations, Apple had a phenomenal quarter, and Amazon … well, expectations are high, and companies are generally delivering. BUT … and that is where to look, perhaps, stocks sometimes don’t even react to great numbers (or even pullback) … at that point, as Jim Cramer the host of Mad Money pointed out at week’s end, investors may be getting the opportunity to buy shares in high-quality companies. Read more HERE! As far as what the first week of May has in store in terms of Cos reporting.
Eeeeaaasy does it: Switching gears into what the US FED is up to, in a few words – remaining VERY accommodating … Forget the days when they were described as the folks that would come to spoil a party by removing the punch bowl! Where are they at now? Remember that great 2020 Jerome Powell line, the “we aren’t going to even think about thinking about” one? Well, this past week, Jerome delivered pretty much the same diagnosis – “too early still to consider … considering” (higher rates, that is …). Therefore, the FED, in my books … never mind the Hawks versus Doves business … is perhaps best described at this juncture as a lamb, or maybe even better yet, a sheep. At some point though … my guess is … they will cause markets some trouble – it is probably just a question of when … because once they have fully succeeded in convincing markets they are harmless sheep … inflation might force them to act like a wolf … When? Wouldn’t I like to know … my guess is that at the earliest, that would be a 2022 problem…
ETFs in April => Again using Vanguard Canada to take the pulse of what April brought for the broader Canadian ETF industry, here is what Vanguard’s results for April suggest:
- Inflows were decent although not as strong as for March (net inflows of just over $1Billion for April / $1.23Bn in March)
- Aggregate AUM up 4.6% versus the end of March, with inflows contributing 60% of that, the remaining 40% representing market performance across the firm’s 37 ETFs available here
- Portfolio solutions aka Asset Allocation ETFs saw inflows representing some $280MM of creations for the month of April (or around 28% of the total, vs $354MM for March and $435MM in February), the majority of this ($192MM) going into the spicier end of the offering aka Growth and All Equity (already the dominant sellers back in both March and February …)
- Year-to-date, net creations are estimated at +$4.65 Billion, and market performance at +$1.62, aggregating to an asset growth to the end of April of some $6.27 Billion (or 19.75% from Dec 31, 2020). Asset allocation ETFs year-to-Apr 30 saw aggregate inflows of $1.4 Billion (representing consistently some 30% of inflows).
You may like reading these insights and perspectives from a PM at Mackenzie Investments. I know I did 🙂 => Click HERE!
Bubbles Bubbles … Oh … and I couldn’t resist this one (two in fact – tell me they aren’t … fun) – seeing that no one can ever predict bubbles … or see them coming (apparently) … ENJOY! (I think we can see them coming … it’s when will they pop that is harder to figure out …):
Mindpath Virtual, together with First Trust Portfolios Canada is hosting the second Thematic ETF, which will focus on 5G (May 20, 2021 12:00pm EST) => Click HERE to Register!