April was a good month for stock market investors. In the US, the S&P 500 rallied 4.05% while the Russell 2000 rose 3.40%. Outside the US, developed markets were up 2.81% and emerging markets rose 2.11%. Broad bond market investors had a “ho-hum” month with the US Aggregate index flat 0.03%, but capital markets were strong as riskier high yield debt gained of 1.42%.
At this point we are mostly through the first quarter earnings season with over half of S&P 500 companies reporting this past month. There have been more hits than misses, as most of S&P 500 companies have met or exceeded expectations. Cynics are quick to point out that these are the expectations these companies reset lower going into the year. That seems true enough, but misses the broader point: the economy itself seems to be doing just fine.
We would be remiss if we did not make a comment or two on the “Sell in May” headlines we expect to see over the coming weeks. Some years that advice will look smart, other years that advice will look foolish, but the analysis tends to be done with the benefit of hindsight. Generally speaking, we don’t think the calendar should tell us what to do and believe that “Sell in May” introduces more complexity into the decision making process. We’ve found that more complexity tends to lead to more mistakes rather than better outcomes over time.
While the market has been very strong the first 4 months of the year, that in and of itself is not a reason to do much of anything at the portfolio level. We’d rather focus on making fewer, but higher quality, and longer term decisions on behalf of our clients than try to time the market one way or another. Changes to the investment objective, from say a “growth” portfolio to a more “balanced” approach, are best done in the context of your individual financial plan in consultation with your advisor.