Originally posted in the Daily Journal of Commerce, Portland OR

Published May 13, 2013

Many myths persist in the market. Some have a bit of truth, and that is enough to keep them around: “Don’t fight the Fed,” “Don’t fight the tape,” and “sell in May and go away.” Do we hang on to the latter because it rhymes, or because it works?

Of course, if one has a taxable account, one has to take into account capital gains taxes. The saying has some credence because historically stocks in May advance only 52 percent of the time, but – on average – 62 percent of the time in a month. Is this a year to sell in May? It doesn’t look like it.

After a strong start to the year, equities are up more than 18 percent year to date. For a time, stocks paused to let the economy catch up, but then resumed their upward trend. Earnings have been better than expected. About 70 percent of firms that have reported so far have beaten street estimates on income; only about 20 percent have failed to meet estimates.

However, revenue is another matter, as most firms have failed to meet their revenue targets and have signaled tough sledding ahead. Unemployment numbers remain persistently high, economic numbers remain weak, and gross domestic product growth is sluggish. The efforts of the Fed to jump-start the economy are having less and less impact. Sequestration has only begun to take effect.

Signs are mixed for the global economy. Europe remains troubled, but at the moment seems to be stabilizing. Headwinds persist, but the market is staying on its upward course with brief interruptions. […]