“Sell in May” might be an invalid tactic for 2020
The investors are debating over the efficiency of the traditional large stock sales in May. The traditional seasonal behaviour might not be the best option for 2020.
There is a widespread belief among stock traders, that it is best to sell stock in May and wait until the summer is over. Only a handful of stocks sees growth in this period and even then the raises are usually meager. According to the LPL Financial analyst, the average growth in May-October period is only 1.5%. The highest average growth of 7% usually happens between November and April.
And yet this year many investors believe that the picture might be different. The pandemic is showing signs of subsiding and the lockdowns around the economies around the world are being gradually reopened. If the worst of the COVID-19 crisis is over, it might mean that the new wave of business activity is coming and the markets might boom during the usually slow time.
On the other hand, some experts believe that the growth might still be limited. According to the less optimistic forecasts, markets might have exhausted their rally resources in April and will retest the lower positions. Since the Federal Reserve’s framework for economic stabilization seems to have been established firmly, less speculation about sudden growth is possible.