Tags: Krinsky | June | swoon | stocks

Some Market Experts See Yellow Caution Flags for a 'June Swoon' in Stocks

By    |   Tuesday, 03 June 2014 01:13 PM

Forget the "Sell in May, go away" stock market adage. Based on monthly returns for the S&P 500 for the last 10 years, June is the worst month by far, according to Jonathan Krinsky, chief market technician at MKM Partners.

For the past 10 years, June has averaged a 1.33 percent decline for the S&P 500, while the next-worst month is August, with a 0.45 percent decline over that time period, Krinsky wrote in a note obtained by MarketWatch.

The old Wall Street chestnut advising investors to sell in May and go away "doesn't necessarily imply that May is supposed to be a bad month, only that May starts the weakest six-month period of the year," according Krinsky.

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The Stock Trader's Almanac went back further than 10 years in its research, studying monthly returns since 1950 and found June has done poorly in terms of S&P 500 performance during that longer time, ranking 10th out of the 12 months, but still shows a decline of less than 0.1 percent, MarketWatch noted.

Rocky White at Schaeffer's Investment Research found that in the past 20 years, the worst three-month period by average return for the S&P 500 is June through August, with an average loss of 0.67 percent, according to the news site.

Russ Koesterich, managing director at BlackRock, wrote on the company blog that if a "June swoon" is ahead for the stock market, it will not be because of high valuations.

"My take: While there are few absolute bargains left anywhere in the equity market and stocks are no longer cheap at the aggregate level, equities at the broad level aren't so stretched as to suggest that valuation alone is likely to end the bull market," he predicted.

According to Koesterich, now is the time for investors to be selective.

While he does not see a market correction in the near term, he said, "There are a number of areas of the equity market that look overvalued and toward which investors will want to exercise caution, including growth stocks — particularly in the biotech and social media sectors — and U.S. small caps."

He suggested investors take a look instead at some beaten-down areas, specifically Japanese stocks, U.S. value stocks and, to a lesser extent, European and emerging market stocks.

Richard Suttmeier, chief market strategist at ValuEngine.com, takes a cautious view of U.S. stocks. He said the drop in first-quarter GDP, plus weaker consumer sentiment and spending readings, outweighs measures by the Federal Reserve to keep interest rates low.

In a column for TheStreet.com, Suttmeier advised that "broad measures of the stock and bond markets are becoming overbought on their weekly charts, and investors may want to book profits now before a potential June swoon."

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InvestingAnalysis
Forget the "Sell in May, go away" stock market adage. Based on monthly returns for the S&P 500 for the last 10 years, June is the worst month by far, according to Jonathan Krinsky, chief market technician at MKM Partners.
Krinsky, June, swoon, stocks
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2014-13-03
Tuesday, 03 June 2014 01:13 PM
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