Should You Buy in May and Sail Away?
Investing is easy. Long term equity market is bullish. That’s a fact. So just buy it.
Yet, people keep on trying to time the market, and -even worse- short it. OK let me be clear: I’m talking about long term investing here, not trading.
If you are a retail investor, why would you look at macroeconomic data, charts, trends, when you know that, whatever happens, market will continue to go up?
The Fed is here to keep things going (higher). If the economy gets sluggish, they will intervene, if a bank fail, they (or JP Morgan) will come to the rescue, if the overall equity market plummets, they will turn on the cash machine…
You see, whatever happens, market will go up. Rates will eventually go down.
I used to think that ISM Manufacturing and Services PMIs mattered, that Building Permits and Michigan Consumer sentiment index were leading indicators, that CPI data was …
None are.
If you are a long term investor, just buy the market. The long-term average annual return of the S&P 500 has been around 10% to 11%.
Even Warren Buffet said it: ““.
Why would any retail investor try to time the market, pick stocks, go through fundamental research, spend endless hours to fine-tune their strategy… when all you need is a S&P 500 ETF ?
Just look at it, isn’t beautiful:
S&P 500
Do you think the beast will go to 2000? Do you want to be short?
“In the short-term it might go down… and it will”
What is “short-term”? A few months? A few years? Then what… it will go up again, reaching new highs as it always does. So why going against it? History repeats itself.
It just amazes me.
So I asked ChatGPT4, and here is the output:
It is a pretty sound answer: going short is mainly used for hedging and diversification, putting aside trading and speculation. We see that it is always in conjunction with other (long) positions, and that being naked short the global equity market is not really recommended (by our new Master ChatGPT).
Unless you are a reckless trader, it is pointless.
And there are so many other markets, stocks, assets for you to short.
Again, let’s ask ChatGPT4 about what to consider before going short:
It is interesting to note that it pretty much says that going short is reserved to specific assets, not the global market.
I guess it is clear: be careful if you intend to short the S&P 500!
Even the latest ISM Manufacturing PMI (for what it is worth) suggests so:
ISM Manu PMI
It is still below 50 but “green”, above forecast and March data point.
Is it a buy signal, or a Bull trap ?
Time will tell, and will confirm it is a buy signal!
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