It’s that time of year… where “Sell in May and Go Away” makes its typically annual appearance. Personally I don’t give it much weight… basically none. Who invests with the timeframe a few months? Not many that consistently make money. But therein lies the rub – this saying is only relevant as a function of how you choose to invest. Your time horizons are likely very different to mine. This post will offer background where the adage comes from. From there, I will try and answer the question of whether the market is “euphoric”. And finally, I’ll share some names that I’ve been adding to…. it’s not NVDA.
Risk
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Are These Recession Indicators Broken?
At the conclusion of their July 26 ’23, meeting, the Federal Open Market Committee (FOMC) voted to raise the target range of the federal funds rate by 25 basis points to 5.25% to 5.50%. The S&P 500 traded around 4,000 points at the time – some 16% off its ~4800 January high. Markets had reason to be worried… Investors had not seen the Fed this aggressive at any time in the past 40 years… and conditions seemed ripe for a recession. What’s more, most widely cited indicators suggested this was a likely outcome. However, it didn’t happen? Why not? Are popular recession indicators no longer relevant?
Risk vs Reward
Warren Buffett once told us “the stock market is a device for transferring money from the impatient to the patient”. Which one are you? And while it sounds cliché, the power of patience is real. We need patience for two things: (i) allow our existing investments to work over time; and also (b) if buying, waiting for prices to come to us (eliminating FOMO). For example, some investors may have felt left out the past three months (I certainly did) – as ‘hot’ momentum stocks like Nvidia, Netflix, Meta and others surged. Fundamentals were not front of mind – where investors thought nothing of paying 40x plus earnings. The momentum trade had taken hold. But as we know – things inevitably revert to the mean.