Seasonality and Stocks
The media is beginning to narrate the “Sell in May and Go Away” headline with stocks. As a result, you might be asking yourself, “are all sectors created equal or do some outperform during the spring and summer months?”
Seasonality and the Consumer
May is one of the better months of the year for cyclical stocks and one of the reasons why we have favored this group in recent weeks. For the past 5 years, May is the strongest month for consumer discretionary stocks.
We can understand why the consumer discretionary sector would outperform as warmer days lead to more outdoor activity.
New jobs, promotions and salary increases as the economy improve all lead to increases in consumer spending. Whether it is new clothes, a new car to get to work or dining out and enjoying newfound prosperity, we spend more as consumers when we feel good about our future and prospects for the economy.
Extra money also flows into bank and brokerage accounts. It is one of the reasons ETFC, IBKR, and SCHW are on our radar. We have a position in Schwab.
Spending is increasing via electronic debit and payment systems as well. Its why we like iPAY, PYPL, MA, SQ, and V.
Industrials and Seasonality
The industrials pick up in May and remain steady into the fall as the chart illustrates.
Home improvement and gardening projects are planned well in advance, during the colder months, so as spring arrives, retailers like HD and homebuilders like DHI, PHM, and LGIH should outperform. The latter, LGIH has earnings this week. Competitors in these industry groups are also looking bullish.
Construction picks up dramatically during the spring and summer for obvious reasons, so look to these sectors for potential candidates. Keep an eye on AA, CBI, IBP, JCI, and USCR.
We’ll be LIVE shortly to discuss this and more. See you at 9:20 AM on LIVESTREAM.
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