Sell In May And Go Away?

That's an old Wall Street saying, and it's based on the tendency for the stock market to lag from May through September and then move higher from October through April.

The Ned Davis Research Group reports that the S&P 500 averaged an 8.4% gain during October - April dating back to 1942, while the market posted a less than 1% gain from May to September during the same time frame.

While it is always a temptation to play such seasonal tendencies in the market, common sense dictates that it is better to base decisions on market fundamentals rather than on what happened in the past. (Technicians, please take note!)

When the month of May arrives in a few weeks, whatever you do, don't assume by virtue of what was stated above that you should begin dumping stocks. Always remember that the market doesn't own a calendar. Instead, the market reacts to a variety of stimuli - not the least of which is corporate profitability.

So if you believe that corporate profits will continue to improve beyond the first quarter, then now is not the time to be selling stock and hibernating until October!