10 Reasons not to Sell in May and Go Away

Much of the most incisive stockmarket and economic predictions we receive in our research is from Mike Williams in New York. Here are his 10 best reasons for staying invested.

1. Trillions in private equity finance (plus borrowing facilities) ready to buy shares when they become cheaper. That takes shares out of the market place and puts new money in the hands of investors who will reinvest, driving supply/demand balance in their favour.

2. Billions of corporate share buy backs over the next 12 months - possibly as much as $800 billion in the US alone. That could take another 5% of share inventory out of the market. That's good for shares you want to be in, not out of.

3. Faster economic growth will be here by the second 6 months of 2007. Remember the stockmarket looks forward not backwards.

4. Strong international economic growth powers on through all the soft spots. Not only is the US growing faster than is being reported, it's also happening in Europe, and sizzling growth in Asia tells us things are going to keep being more profitable.

5. The Dollar will not fall out of bed. It will be stable, possibly stronger, which believe it or not is great news for equities.

6. The US housing depression will turn out to be just a sore head.

7. Japanese and Chinese Central Banks are about to include more equities in their portfolios. Their pension portfolios are now going to be able to buy equities later this year, equities they were never able to buy before. What does that mean? More demand.

8. Biggest US tax refunds in history. When we hear about all the bad news nobody tells us the good news. According to tax authorities in the US the biggest tax refund in American history will be coming to private investors over the next 6 weeks. Guess what they're going to do with it? Spend it. Hoorah!

9. The elephants - the biggest financial institutions in the world - will use any summer pullback as a buying opportunity to buy more equities. Our research showing they are going long in equities. In other words they are buying more just when Hedge Funds and private individuals are selling. These big boys don't get it wrong too often.

10. We are probably due for some correction in the market. That's when shares go on sale. We've had a great strong run and so we need a correction. The best buying opportunities have traditionally been in the summer. It's a time to buy not sell.

Bottom line, sell in May and go away doesn't work. You want to be a buyer not a seller.


Alan Steel
Alan Steel Asset Management Ltd is authorised and regulated by the Financial Conduct Authority

The Financial Conduct Authority does not regulate tax advice

This article is the personal view of Alan Steel. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.