Sell in May & Go Away ?

1 May

It’s far to say that 2012 started well, which lead to a market correction. The outcome so far for the year is at best neutral. So following sell-offs in 2010 & 2011, s 2012 going to be the same?

It seems less likely as we are far more cautious on our overall outlook but you can never say never with the major economic over-hangs around the world – Eurozone Debt, China’s declining GDP, global economic growth, commodity pricing, etc., etc.

So far, we have witnessed weak data reigniting fears and concerns over global growth, events in China and the Middle East and the Eurozone Debt Crisis. In 2010 & 2011 a strong first quarter was followed by heavy selling

So for 2012 ?

  • we will have periods the same but unless there is a catalyst to drive a correction, it seems less likely for now.
  • The behaviour of the equity markets, coupled with the dwindling number of positive economic surprises, the valuations and technical signals share striking similarities with the stock market years of 2010 and 2011.
  • Positive earnings revisions should help support the equity markets in coming months.
  • The first quarter 2012 reporting season indicates that cyclical sectors such as technology and consumer cyclicals have the greatest surprise potential.
  • The Eurozone debt crisis remains a major concern with a risk that it could lead to negative sentiment. (If the Eurozone remains in recession till the end of the year, a fresh escalation of the Euro crisis is likely.)

My Position

I have reduced market risk within equities and previously removed commodities from portfolios. Currently, I am retaining a strong equity position but focusing on cash flows, balance sheets and diversification.

I remain underweight in global and convertible bonds but have strong positions in corporate and government debt (during this period of uncertainty) and a light holding in gold.

To contact me :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

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