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GregCorneille
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Gregory is the President and Investment Advisor of Axcel Capital Management, LLC. He directs all research, analysis, and corporate strategy for the ACM Managed Account Programs. He is a former U.S. Army officer and a graduate of Hampton University. He began his career in investments in 2006 and... More
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Axcel Capital Management, LLC
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Axcel Capital Management Market Commentary
  • May 2014 Market Commentary: Sell In May…...Or Stay? 0 comments
    May 13, 2014 7:39 PM | about stocks: EEM, TLT

    As we head into the summer months of 2014 after an up and down start to the year, can we expect the stock market to follow the seasonal "sell in May and go away" path? Last month, stocks managed to grind out modest gains and reach fresh all-time highs during the month of April, despite a mixed bag of earnings and reports of slowing economic growth. For the month of April, the S&P 500 was up 0.6% and the Dow Jones Industrial Average (DJIA) up 0.8%. For the year, S&P is currently up 2.84% and the Dow up ever so slightly (0.03%) as of the end of April. Interest rates declined again in April, with the 10-year Treasury note rate finishing the month at 2.64%.

    Historically, stocks tend to perform below average during the summer months. This phenomenon has been even more evident in the calendar years since 2008 - with a notable exception being last year. Putting that aside, the larger question is how much more the current bull market has - and where to invest to maximize gains. While no one can answer that definitively, we do feel that despite the slowing there may still opportunities to profit as an investor in this market.

    Fundamentally, GDP in 1st quarter shows the economy grew just barely, slowing considerably from the fourth quarter of 2013 and well below analysts' estimates. Despite this, the Federal Reserve continued with its planned reduction of quantitative easing (the Federal Reserve's monetary stimulus to the economy) trimming or "tapering" the purchasing of treasury bonds to $45 billion per month. While the Fed remains on course for a full exit of quantitative easing by the end of the year, it was also anticipating overall GDP growth of 3% - which now looks unlikely. However, other economic data released in April - such as employment numbers and consumer sentiment -was encouraging enough to support the Fed's decision to stay with its current plan.

    First quarter earnings came in largely better than expected last month, with many companies expecting lower numbers in part because of business disruptions due to weather. However, we are once again beginning to see a large number of companies issuing negative earnings guidance; or insight into their expected performance over the second quarter of the year.

    From a technical perspective, the S&P 500 remains above its 50, 100, and 200 day moving averages, although it did dip below both the 50 and 100-day during the month of April. The relative strength of the S&P 500 was virtually unchanged and the relative strength of small cap stocks (as represented by the Russell 2000 index) actually turned negative. On the other hand, emerging market stocks have shown higher relative strength and have fully rebounded over the past couple of months after a big January decline; enough so to warrant eliminating our position in large cap stocks and replacing it with a position in emerging market stocks. With this change, we remain holding a 50% position in the equity markets, and we continue to hold our position in long-term treasuries.

    Disclosure: The author is long EEM, TLT.

    Stocks: EEM, TLT
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