While it's hard to predict the markets, when it comes to the month of May, one thing is for certain: You will hear the financial media and market participants say "Sell in May and Go Away." However, after examining the data, there is no convincing case for investors to “Sell in May and Go Away” this year, especially, if 2016 is not going to be a recession year.

1. Market Watch – May 2016
Don’t sell in May, don’t go away
STRATEGY
We continue to
favour a pro-risk
strategy. Expect
poor returns if you
“Sell in May”.
EQUITY
Stay overweight
equities and
positive Asia ex-
Japan, on
fundamentals, flows
and valuations.
FIXED INCOME
Remain positive
emerging market
high yield, backed by
China stability, dovish
Fed & commodity
prices.
FX
Reduced upside for
the bottoming USD
due to the more
dovish Fed. Less
downside for gold.
While it's hard to predict the markets, when it comes to the month of May, one thing is for certain:
You will hear the financial media and market participants say "Sell in May and Go Away.”
There might be some truth with respect to investors “going away” as trading volumes have been
traditionally lower in the summer months. However, we need to examine the data to check if this
maxim really works.
Looking at how the S&P 500 has performed between the period of May and September each year
since 1985, the S&P 500 delivered positive returns in 20 out of the past 31 years. In other words,
investors would have made money 65% of the time by staying invested over the summer months.
There were 11 years that the S&P 500 corrected during the summer months. In those years, the S&P
500’s decline were mostly preceded by strong gains from January to April. With exception of four
years - 1999, 2000, 2001 and 2008 – when January-April weakness was carried into summer months.
Those years were either recession years or the bursting of the dot-com bubble.
Therefore, there is no convincing case for investors to “Sell in May and Go Away” this year,
especially, if 2016 is not going to be a recession year.
Macro drivers matter more than seasonal factors like “Sell in May”. The recession scare in early-2016
has proved to be a false alarm. The rebound in US and Chinese manufacturing surveys confirmed
that underlying economic conditions are resilient. Over the past month, the outlook for Asian
equities has improved, as we are seeing a cyclical rebound in China. Hence, we remain
comfortable with our “overweight” call on Asian equities.
At some point market volatility will return. In particular, the upturn in U.S. inflation and the danger
that the Fed rate cycle will be steeper than is currently discounted are not yet on investors’ radar
screens. Furthermore, political risk appears to be growing with “Brexit” and the US presidential
election.

2. Marc Van de Walle
Global Head of Products
Assessing the balance of risk and reward, we make no changes to our tactical asset allocation
calls. We maintain our “overweight” call on equity and emerging market high yield bonds, which
again gave us good performance in April. This should continue to benefit from the broadly benign
macro environment.
Don’t Sell in May, Don’t Go Away!

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