This week there were no position changes in the ETF Country Plus model. Our current three positions are FXI, TMF, and IFN. For those trading the “Stops & Targets,” TMF is only 2/3rd’s of a position.
The MSCI World Index closed the week up +0.77%. The ETF Country Plus model ended the week up +1.69%. The ETF Country Plus Strategy is up +21.02% year-to-date compared to its benchmark, the MSCI World Index, which is now up +5.72% year-to-date.
This Week’s Strategy Lesson: Is “Sell in May” losing some Cachet?
There is an old adage in markets that you should “Sell in May and Go Away.” It’s probable that this originated from the tendency for New York fat cats to pull money out of stocks to take prolonged vacations in the Hamptons, leaving markets in a slump over the hot summer months. And just looking at the data, it would appear to bear out this aphorism.
Over the last 50 years, during the November through April period the Dow Jones Industrial Average typically outperformed the May through October period by almost 6% a year. It should be noted though that the summer months still had a positive return, just noticeably lower.
And putting performance aside, for many active traders, these months can present further problems with very low trading volumes causing many promising trades to wither on the vine with no real follow-thru.
Though, low average returns and volume might not be enough reason to completely take a vacation from markets. Active trading requires good trading volume but many longer-term strategies rely less on intraday volume. And furthermore, while the average return over the summer is low, there’s a lot of variability in the data such that sitting out the summer every year could result in missing some very nice rallies.
This year has been one of those rallies. The SPY is closing out a strong August up around 4% and has jumped 6.2% since May 1st. Not to be outdone, the ETF models have put in a few months of great work over the summer, up now an average of 13.9% across all of our models over that same period (Stops & Targets versions).
The ETF strategies present an excellent way to stay invested during these slower periods of the market. Being “continually” invested in the market in a strategy like the ETF models has its ups and downs. The model uses wide stops and that often mean you will ride the market waves up and down, but it also means that we are right there and ready to catch the rallies when they happen. Perhaps it’s time to do away with the old “Sell in May.”
The Current Condition of the Model
For the country model, we are in FXI, IFN, and TMF. No position changes are imminent. THD is currently in 3rd place with FXI dropping out of the top three but the TSI scores are still close. No position change is imminent.
Stay tuned to daily updates for any position changes.
Here is a summary of the weekly performance of all the ETFs that the strategy monitors:
