Sell in May and buy back before Jerome Powell blinks and goes all soft on us? Sell in May and miss the miraculous five-day rally, best of the year? Sell in May and miss the incredible Non-FANG tech rally?
Nothing repulses me more than when we base hardcore decisions on silly ditties. But because May was, indeed, a bad month, we will have to endure an ever-larger amount of hoopla about it next year. It's the type of thing managing editors of all sorts dream of: some sort of rhyming conventional wisdom that allows you to program guests and build themes around the concept well ahead of time.
But it can be so costly as to remind us that selling is a lot harder than you think, because while it's always terrific to take a profit -- as you would had to do most likely if you sold in May -- it's almost impossible to time the re-buys of what you lost. Unless you think that "go away" means stop owning stocks, period, the journalists who play this game -- and it is journalists not fund managers, as it is way too irresponsible to make a calendar judgment -- don't tell you when it is safe to come back.
Or, another way to look at it, did you hear sell in May and buy back in June? I know I didn't.
If you step back for a second and consider what happened here, it's almost the mirror image of what occurred back in December. At that point, with much boots-on-the-ground information showing a slowdown, in part because of relentless rate hikes, Powell hiked rates one more time and gave us no sign that he was done.
He relied on the anecdotes of the Beige Book and his talks with his colleagues to create a mosaic that showed the economy still needed braking. I have no idea how he got to that mosaic. It simply wasn't the case.
I used to give you a litany of so many commodities and products that were rolling over, everything from liner board and chemicals to steel, homes and autos. Plus the gloom of Washington had once again settled on America, now that the tax cuts were being annualized and the lack of the state and local tax deduction hit home. Both can explain the weakness in retail.
It was a terrible time for a rate increase and the stock market knew it.
May was no different. We once again started hearing that the economy was getting strong enough for the first rate hike of the year. Yet the trade wars were really starting to heat up and the confusion and fear that they sowed was bleeding into the stock market. We saw a decline in employment. We saw and staggeringly negative set of retail numbers, with only Target (TGT) , Costco (COST) and Walmart (WMT) accelerating, the opposite of what you want if you are looking for the huge number of Davids to say in the game against these Goliaths.
So, once again, Powell had to state the obvious without stating it: It may be time for a rate cut, because there shouldn't have been a December rate increase to begin with. You needed to anticipate this change -- and to do so you had to buy in May or at least the end of May so you were back in for the change of heart.
Now I was listening to the news all last week about the biggest rally of the year, and I think it came because of the dramatic oversold position coupled not with a rate hike but with Powell admitting that there's weakness, albeit nothing the Fed caused. It's easy to blame things on the trade talks because they are no-brainer bad in the short term. It's not so easy if you are the Fed to blame yourself.
So, here's what I suggest next time you hear Sell in May. Ask yourself under what conditions or what ditties or doggerel you get to buy back your stock and be glad no one was saying "Swoon in June" to drive out the people who could handle the miserable May we just went through.