Monday 1 June 2009

Sell in May and Go Away

Today is June 1st 2009. Any historic look at the markets will tell you that between now and October every year, there is an almost guaranteed annual decline in the value of stocks and shares.

However, this year is of course different (as always!), as we are in the midst of the worst recession since WW2 (and off topic, I agree with this article strongly, suggesting politicians have forgotten all about the economy as they wallow in their own self-pity).

And yet for all that, the markets have surged 28% since march 2009. All on the back of nothing else other than everyone is not going bust. Banks and Property share prices have rallied from near death to stable. Commodity prices have come back up, with oil at $66 up from its low of $33 and this has pushed up oil and mining stocks.

Is this correction now priced in? It has to be, there is still so much bad news to come in the commercial property sector, in government debt, in unemployment, in demand for consumer goods, in mortgage supply.

To top all that, inflation has not gone away like the Bank of England said and we may well be poised to raise interest rates before the end of this year, which really will stall any recovery.

Now is a time to think carefully about ones investments and I am going to review mine. I will update here when the decisions and changes are made.


Tuscan Tony said...

Interesting and valid points, thanks.

Anonymous said...

I know, it is tricky at the moment.
On the one hand a bond market crash could cause a massive sell off, on the other hand QE may lead to hyper inflation.
Interestingly this year the junior gold shares have not sold off so far, maybe it's a sign that gold is about to blast off.