Sell in March and Go away: Will Investors Sell Earlier Than Expected This Year?

•  Ron.Moss

•  Mar 01 2023
 

We know the saying "sell in May and go away", because of the weakness of the stock market between May and October. But something else may happen this year. Inflation has not yet decreased, interest rates are rising and we may see more investors selling as early as next month, claiming that the yield will lose value earlier than expected.

The month of May has become a month in which many investors re-examine their investments. It is of course affected by the seasonality of the market. Some believe that the summer will not be bright and familiar. Historically, investors realize 75% of their annual returns in the fall or winter season.

The origins of this saying can be traced back to the 1960s when statistical data showed a distinct pattern of higher profits in the stock market from November to April, followed by a lackluster performance between May and October, with even some decline. Despite the lack of a clear explanation for this phenomenon, as no investor can have precise information about the future of the stock market, many believe that this year could see an earlier sell-off, perhaps even in March. The possibility of a lower yield has led some investors to consider taking profits sooner than usual.

The explanation for this is logical: the narrative that led to the increase at the beginning of the year was the hope that inflation would slow down so that the Fed would stop raising interest rates and possibly lower them. But the market teaches us otherwise. The economists estimate that this is not the end of the interest rate hikes in the home countries, which may continue until the summer

The reasoning behind this can be easily understood: the initial surge in the stock market was fueled by the expectation that inflation would decrease, prompting the Federal Reserve to halt or even decrease interest rates. However, as history has shown us, this narrative may not hold true. In fact, economists predict that interest rates in various countries may continue to rise well into the summer, contradicting the initial hope that prompted the stock market to rise at the beginning of the year.

Despite economists predicting a decrease in inflation to 6.2%, the annual rate actually dropped to 6.4%, which is somewhat of a letdown. Furthermore, the producer price index exceeded expectations by rising at a higher rate, prompting the Federal Reserve to discuss further interest rate hikes. These developments were also reflected in the stock market.

The current issue at hand is how investors will respond to the ongoing situation. Will they become accustomed to the current state of affairs? Several economists predict that company profits will dwindle in the latter half of 2023, which could potentially diminish investor confidence even further.

If they sell in March to go away? Don't be surprised if next month many investors change their policy and sell already in March, instead of waiting for the summer.

Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

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