One of Wall Street’s biggest bulls suggests unloading stocks this month is a mistake.
According to Canaccord Genuity’s Tony Dwyer, the old adage “sell in May and go away” doesn’t apply this year.
His call is based on historical research that reveals the odds are against seasonal declines right now.
“When we looked underneath the surface in a nonrecession environment, we found that you’ve never had a negative market going into May and then had a negative May through September,” the firm’s chief market strategist said Monday on CNBC’s “Trading Nation.” “It’s more likely you’re going to have an up May through September.”
His latest thoughts came as the stock market failed get back to positive territory for 2018. The Dow is down almost 2 percent this year, while the S&P 500 is off about 1 percent.
“Ultimately, the market moves with the direction of earnings. That is definitely going to be positive for the foreseeable future,” he added.
But Dwyer, whose S&P 500 year-end target of 3,100 is the second highest on the Street, doesn’t see a positive period between May and September blowing the socks off investors.
“May is seasonably a weaker period,” he said. “It may not be the best part of the gain. But again, you should have a gain.”
To capitalize the most during that stretch, Dwyer recommends what he calls “productivity trade” areas that are positioned to offset higher inflation, particularly in labor. Inflation concerns have been looming over the strong earnings and economic fundamentals.
“Who funds productivity? That would be the financials and capital markets companies. How do you implement it? That would be the industrial automation companies,” Dwyer said. “And, what’s behind that? That would be the technology companies: software, hardware, services.”
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Sell in May and go away? Canaccord’s Tony Dwyer reveals his unique take on the saying 5:10 PM ET Mon, 30 April 2018 | 04:39