This time of year, everything is in bloom with spring in the air and all the joys of summer just around the corner. Whether you are looking forward to (or possibly dreading) summer vacation from school, a trip or family vacation, or just a bit of warmer weather, May is a time of beauty and anticipation. But May has often been greeted warily by investors as we have all heard the old phrase “Sell in May and walk away.”
Historically, it’s true that the summer months have experienced some volatility with low trading volume since Wall Street is distracted with the same daydreams and vacations. We do not give any credence to this phrase at CJM because trying to time the markets can be a dangerous and often costly decision. As disciplined investors, we look at the underlying economy as well as other factors that may lead to a downturn either domestically or abroad. While our crystal ball is no brighter than anyone else’s, we continue to believe that remaining invested in a diversified portfolio is the best way to build and maintain wealth.
We remain focused on what has gotten the markets where they are today with the S&P 500 up 6.79% and the international stock index MSCI EAFE up 12.34% through May 11th. Global economies are continuing to grow and U.S. corporate earnings have also greatly improved over the last year, both catalysts for continued market increases. We recognize that there has been some optimism over the possibility of income tax reform and should progress on that front slow or cease there may be some increased volatility.
It is worth noting that in recent months the measure of volatility, which tracks the severity of market swings, has been at historically low levels so it’s only realistic to anticipate that to revert back to normalcy. The unseen benefit is that volatility provides an opportunity to fund managers to invest in companies they believe in at a better price. Plus, for those investors who are systematically investing either in their personal accounts or funding their retirement plans through payroll deductions, volatility means funds are “on sale” and who doesn’t like to buy something on sale! For those who are taking income, you should have a plan in place to ride out whatever may come.
So, in the spirit of one of our favorite planners, Tim Jones, we encourage you to go outside, take a walk, and enjoy the beauty of the springtime. Reflect back on those cold winter days and look forward to the summer to come. Don’t get caught up in the weekly market swings or try to time the market because a long-term investment focus is your best asset.