By Matthew Scott

Posted 8:00am 05/30/10

Hindsight is definitely 20-20, but many investors are no doubt kicking themselves for not practicing the old adage “Sell in May and go away,” after May turned in the worst market performance since February 2009.

Highlights:

Rose Greene, a certified financial planner for LPL Financial in Santa Monica, Calif., who started taking profits before the May sell-off, has a different approach from the “Sell in May” adage.

“If people have unrealized losses this month, I would take those losses and book them and use them against the capital gains they will hopefully experience by the end of the year,” she says. Rose then advises taking the proceeds from those assets and purchasing investments that are dissimilar to the ones just sold. Then buy back into the market at different intervals on market dips.

“I wouldn’t put all my money in at one time,” she says. “I would also be looking at asset classes that aren’t quite as vulnerable to headline news — for example, smaller and midsize U.S. companies are not as tied into the euro and what’s happening in Europe.”

To read the full article click HERE

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risks including loss of principal.

Investing in real estate investment trusts (REIT’s) involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of the program will be attained.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors.

The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures aall domestic and non-U.S. based common stocks listed on the NASDAQ Stock Market. The Market value, the last sale price multiplied by total shares outstanding is calculated throughout the trading day, and is related to the total calue of the Index.

Weekly Market Commentary, June 1, 2010
Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• “Sell in May and go away” only works about one-third of the time. With a pullback having already taken place, we find little value in this old adage.
• We believe investors should “buy in June and stay tuned” this year.
• Staying tuned to the conditions in the economy and markets will be important to investment decision making in the coming months as the economy transitions from a recovery to sustainable growth.

The old adage of “sell in May and go away” has been repeated so many times we are still often asked if this is a sound investing strategy. We do not find sound reasoning behind this maxim. Instead, we believe investors should “buy in June and stay tuned” this year.

We expressed caution in mid-April, given our outlook for a pullback in the stock market. However, now that the pullback that began on April 23 has occurred, we have spent most of May calming fears of another stock market plunge and, in general, we believe this is a good opportunity to buy stocks rather than sell. Unfortunately, investors cannot simply buy now and go away since the headwinds for the economy and markets are increasing during the second half of the year. Investors must stay tuned to the transitioning conditions for economic and profit growth warranting a tactical approach to portfolio management.

The reasoning behind “sell in May and go away” stems from the historical evidence that stock market returns, on average, are weaker over the six months from May through October, by about 2%. However, returns during this period have been positive about two-thirds of the time in the post-WWII period. This means one should only “sell in May and go away” one-third of the time. We believe 2010 warrants a different strategy.

Staying tuned to the conditions in the economy and markets will be important to investment decision making in the coming months as the economy transitions from a recovery to an environment of sustainable growth. These economic transitions are often uneven as the drivers of growth shift from government policy to private businesses while the leading indicators of economic activity peak and momentum begins to slow.

We believe the market is due for a rebound, as we stated last week in our commentary, entitled: Ten Reasons for a Rebound. However, the rebound is likely to be followed by more volatility as headwinds arise in the second half of the year, for several reasons:

• As the Fed signals coming rate hikes.
• China’s economy begins to respond to the efforts to slow the pace of growth.
• Policy stimulus fades in the United States leaving behind the drag of a huge federal budget deficit.
• Europe’s growth and solvency problems continue.
• As economic indicators peak in the United States during the second quarter, economic momentum begins to slow.
• Investors must stay tuned this summer to find attractive opportunities when presented and successfully take profits when necessary. We will be watching the LPL Financial Current Conditions Index closely for the impact of these headwinds on economic and market conditions.
  

Click here to Download the Full Report

IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and make no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

What’s the difference between “billions” and “millions”? About 650 points.
Provided by Los Angeles Financial Planner, Rose Greene, CFP ®

Did a mistake make a selloff more severe? The Dow Jones Industrial Average settled at 10,520.32 Thursday after a 347.80 loss, with fears over European sovereign debt affecting Wall Street. Yet the 347.80 decline was just half the story.

The Dow also saw its greatest-ever intraday swoon Thursday, diving 998.50 below the open at one point and taking an intraday swing of 1,007 points._1,2

What happened? At this point, it looks like the same kind of thing that happened on Black Monday in 1987: technology and trading errors betrayed Wall Street.

That was “millions”, not “billions”! Citing multiple sources on May 6, CNBC and Reuters reported that a trader, possibly at Citigroup, mistakenly typed a “b” for billion instead of an “m” for million – apparently when authorizing a trade concerning Procter & Gamble. P&G shares fell 37% at one point (more than $22) before recovering to lose 3% on the market day._3,4,5

As the selloff gained momentum, some weird things happened Thursday. In a stretch of two minutes, 16 billion e-minis (futures contracts tied to the S&P 500) were sold. Accenture became a penny stock – no kidding, share values were showing up at $.01 on the New York Stock Exchange at one point. PG and 3M shares actually went below the “circuit breaker” level on the NYSE, freeing traders to purchase and sell shares of those companies on other exchanges. Clearly, technology was running wild._4,5,6

Trader Steven Rickard reacts in the S&P 500 futures pit at the CME Group in Chicago near the close of trading. (Associated Press, May 6, 2010)

Will trades be erased? Apparently some will be: Thursday evening, the NASDAQ announced it would cancel all trades of stocks whose prices moved more than 60% between 2:40-3:00pm EST on May 6. Just minutes after that news item, the NYSE said it would do the exact same thing.₇

What’s the lesson here? Don’t panic. Be patient. Don’t succumb to impulse when it comes to stocks. In the last few years, we have seen amazing market volatility AND amazing rebounds – and the resilient bull market we’ve seen has taught every investor that stocks can impressively snap back. Curse the technology that caused this swoon if you like, but keep fundamentals and diversification ever in mind.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. petermontoya.com, montoyaregistry.com, marketinglibrary.net
 
Citations
1 – money.cnn.com/ [5/6/10]
2 – cnbc.com/id/36988229 [5/6/10]
3 – cnbc.com/id/36999483 [5/6/10]
4 –money.cnn.com/2010/05/06/markets/markets_newyork/index.htm [4/29/10]
5- cnbc.com/id/36988229 [5/6/10]
6 – blogs.barrons.com/stockstowatchtoday/2010/05/06/no-ordinary-collapse-dow-snaps-back-from-1000-pt-drop/ [5/6/10]
7 – reuters.com/article/idUSN0614132620100506?type=marketsNews [5/6/10]

Provided by Los Angeles Financial Planner, Rose Greene, CFP 

The stock market is amazingly resilient.

The Stock Market can Sometimes Feel like a Roller Coaster Ride

You might be surprised at how fast the stock market can change … for the better. Let’s look at how the market has recovered remarkably – and quickly – from some notable downturns.

2008-2009: The collapse of the subprime mortgage markets triggered a recession and made 2008 the poorest year for stocks since 1931. The Dow Jones Industrial Average fell 10% in June 2008 and fell 10% again in October 2008, losing 19.12% for the year. On March 9, 2009, the major U.S. indices closed at 12-year lows with the S&P 500 at 676.53.^1,2,3

Then the market took off. Investors who swore off stocks in early 2009 lost out on one of the great rallies. From the March 9 lows to the end of 2009, the S&P 500 soared 64.83% while the NASDAQ gained 78.87% and the Dow gained 59.28%.⁴

2001-2002: After the four-day closure of the stock market following 9/11, the Dow fell 685 points to 8,920 on September 17. It kept falling, losing 14.26% in a week to close at 8,235 on September 21.  But what happened next? A huge gain. The Dow closed 2001 at 10,021 – a 21% rebound in less than three months.⁵

There were more challenges ahead. On October 9, 2002, the Dow had fallen to 7,286.  But on Halloween, the Dow sat at 8,397 – a 10.6% gain in 22 days.⁵

As for the people who panicked and bailed out of the stock market, they ended up kicking themselves:  in 2003, the DJIA gained 25.3%, the S&P 500 26.4%, and the NASDAQ 50%.⁶

1987: October 19 was Black Monday: in a contagion of selling exacerbated by unchecked computer technology, the Dow lost 22.6% in one day, falling to 1,738, a 508-point loss.⁷ (That would be akin to a 2,400-point one-day drop today.)  The S&P 500 lost 20.4%.⁸ By comparison, the initial “Black Monday”,  the stock market crash of 1929, represented a 12.8% market loss.⁹

Then the recovery kicked in. During the next two trading days, the Dow gained nearly 300 points – and it closed 1987 at 1,939, gaining back all of the loss and ending up 2% for the year.¹⁰ By January 1990, the DJIA was at 2,800.¹¹

If you were fortunate enough to invest $1,000 in the S&P 500 index at the close of Black Monday and reinvested your dividends, you would have wound up with about $10,800 20 years later.⁷ If you had invested in the Dow stocks a week before Black Monday, you would have lost 30% on your investment in the crash … but if you held on, your investment would have gained 462% over the next 20 years.¹⁰

1974: With investors fretting over rising inflation and the energy crisis, the Dow loses 30% of its value during the first three quarters of the year. Suddenly, the Dow gains 16% in October.¹² In early December 1974, the Dow is at 577; in July 1976, it hits 1,011.⁵

So while the Dow, S&P and NASDAQ have been through some rough periods (and even a poor decade), the important thing is how they have climbed historically.

On August 12, 1982, the Dow was at 777.  On January 14, 2000, it was at 11,722.98.  That’s a 1,500% gain in 17½ years.¹³ This is why people stay in the market through the downturns. This is what the market is capable of achieving. There are periodic descents, but history is definitely on an investor’s side.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. The Standard & Poor’s 500 Index is an unmanaged index generally representative of the U.S. Stock Market.

This material was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations.

1. 1 cnbc.com/id/28451744 [12/31/08]
2. 2 allheadlinenews.com/articles/7013587460 [1/3/09]
3. 3 money.cnn.com/2009/03/09/markets/markets_newyork/index.htm [3/9/09]
4. 4 cnbc.com/id/34645043 [12/31/09]
5. 5 the-privateer.com/chart/dow-long.html [6/30/08]
6. 6 upi.com/Business_News/2003/12/31/UPI_NewsTrack_Business/UPI-75601072911443/ [12/31/03]
7. 7 sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/10/18/BUODSRIN6.DTL&type=printable [10/18/07]
8. 8 foreignpolicy.com/story/cms.php?story_id=4026 [10/07]
9. 9 money.cnn.com/2004/10/26/markets/1929crash/ [10/26/04]
10. 10 articles.moneycentral.msn.com/Investing/Dispatch/BlackMonday20YearsAfter.aspx [10/19/07]
11. 11 answers.com/topic/closing-milestones-of-the-dow-jones-industrial-average [7/3/08] 12 money.cnn.com/2008/06/27/markets/bear_market.moneymag/index.htm [6/27/08]
12. 13 answers.com/topic/closing-milestones-of-the-dow-jones-industrial-average [7/3/08]

Overall, the buying and selling in the stock market has been balanced over the past month as the S&P 500 has remained in a range of 1090-1125. While there are many factors influencing our outlook for 2010, including the pace of economic and profit growth and the changes in global monetary and fiscal policy, we believe the buying power is likely to win out over the forces of  selling in the coming months.

Some Highlights:

- At the heart of it, all markets come down to buyers and sellers.

- Since March of 2009, buying from individual investors has been rising and may mark a multiyear turning point for individual investor inflows.

- Purchases of U.S. stocks by foreigners have risen back to the prior peaks in 2000 and 2007.

- The sellers include companies and insiders, or top executives, of S&P 500 companies.

- We believe the buying power of individual investors is likely to win out over the forces of selling in the coming months.

Weekly Market Commentary 01_04_10