Forget Sell In May: Buy These ETFs Instead This Year

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Wall Street analysts start coming up with their views this time of the year thanks to the old adage “sell in May and go away.” The proverb is ingrained in the S&P 500’s awful historical run for the May-to-October period. May has been a subdued month with average gains of 0.17% since 1950. But the saying hasn’t held well in recent times. 

Per an article published on CNN.com, the proverb proved itself wrong in the past few years with the May-October period turning pretty profitable. Since 2011, we had only one year (i.e. 2011) when the stock market crashed (down 7.1%) during the May-October period followed by meager gains in 2012 (up 2.2%), 2015 (up 0.8%) and 2018 (up 3.4%), per a Motley Fool article.

President Biden is reportedly planning to launch a capital gain tax hike in the coming days, which may definitely cause some threat to the upcoming market rally. But there are plenty of reasons that indicate threats from tax hike talks will be overshadowed by the upbeat market momentum in May. Let’s delve a little deeper.

Wall Street in High Momentum

The S&P 500 logged its third successive month of gains in April, adding more than 5% to the index thanks to upbeat economic recovery. The S&P 500 has now added 11% for the year. While the S&P 500 and the Dow Jones have hovered around their all-time highs throughout April or hit new highs, the tech-heavy Nasdaq Composite also recorded its first all-time closing high in more than two months. With the economy recovering fast from the pandemic, we do not expect the momentum crash in the near term.

Upbeat U.S. Economic Data Points

Upbeat economic data should help the rally to continue. The U.S. economy grew an annualized 6.4% in the first quarter of 2021, breezing past expectations of 6.1%, following a 4.3% uptick in the previous three-month period. Apart from the reopening-driven third-quarter jump last year, the latest reading marked the best period for GDP since the third quarter of 2003. The labor market is steady and the latest retail sales were also promising (read: ETF Areas to Win on Smashing Q1 U.S. GDP Growth).

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