Market Update

‘Sell in May and Go Away’ is a trading maxim which, according to Investopedia, encourages an investor to “sells his or her stock holdings in May and get back into the equity market in November…” Traders who adhere to that adage may be pondering averages and the many exceptions right now. During the first two weeks of the month, the Dow Jones Industrials Average, the Standard & Poor’s 500, and the Russell 2000 Indices all reached new highs – with the FTSE 100 and FTSE All-Share within points of all time highs. The FTSE 100 passed 6,600 and the Dow passed 15,000.

Bulls are in the majority among investors, although there is some bearish sentiment, according to the Bull and Bear Wise Index. Investors’ changing expectations are reflected in CNNMoney’s Fear & Greed Index which showed investor sentiment has shifted from ‘fear’ one year ago to ‘extreme greed’ last week. The premise of the index, which measures seven indicators, is investors are driven by two emotions: fear and greed. When investors are fearful, stock markets may fall more than they should; when investors are greedy, markets may be pushed higher than they should be.

Investors’ inclination toward stocks may be one of the reasons for declines in the value of gold and commodities last week.

Although there was little of it, economic news generally was positive last week. Production output rose 0.2 % between Q4 2012 and Q1 2013. The largest contribution to this growth came from mining & quarrying which rose by 4.0%. Manufacturing fell 0.3% over this period.

Production rose 0.7% between February 2013 and March 2013. There were rises of 1.1% in manufacturing and 2.4% in the electricity, gas, steam and air conditioning sector.