Sell In May and Go Away? What About the Election?

Natalie Pace dancing in front of Restormel Castle. Photo by: Marie Commiskey. Where will you vacation this year? Join us at Restormel in March 2025? Email [email protected] for information.

Sell In May and Go Away? What About the Election?
 
April is normally a great month on Wall Street, which is why March/April have been coined as the Spring Rally. However, this April stocks lost -4%. Is this the beginning of a bigger slide? Will equities wobble, soar or sink? How will the election affect the outcome? What should you do now, if anything, to protect your wealth?
 
Here are factors that institutional investors (the whales of Wall Street move the markets) are watching. 
 
Interest Rates
Sell in May and Go Away
Election Year Trends
Debt levels
Stock Buybacks
Why Rebalancing is so Important
Is Warren Buffett a Buy & Hope Investor?
 
And here is more color on each point. 
 
Interest Rates
Federal Reserve Board governors are positioning a “higher for longer” scenario, a bitter pill which likely caused the April retreat on Wall Street. So far, the S&P 500 is still up 8.6% on the year. However, every time stocks try to gain ground, based on some “new hope” of a rate cut, they tend to give it up quite quickly.
 
The Fed Fund rate remained at 5 ¼ to 5 1/2% at the May 1, 2024 meeting. Futures data shows that there is an expectation for pauses at the June and July meetings (Source: CME FedWatch). 25-50 basis points cuts are expected by the Dec. 18, 2024 meeting.
Lower interest rates help everyone from Main Street, to Wall Street, to Madison Avenue, to Washington DC, and everywhere in between, and tend to get cut in recessions. While no recession is predicted for 2024, there are shadows in the wings that have all of us concerned – everything from war, political uncertainty, a contentious Presidential election, empty office buildings, excessive levels of debt and a small, but increasing level of auto and credit card defaults. If any of these problem areas become a full-blown crisis, stocks will head south. For now, the headlines are dominated by student protests, politics and war, which (so far) isn’t causing weakness in equities. However, there is never a warning before a bank fails or a major corporation slashes their dividend, which is why rebalancing your wealth plan once a year is a great idea, no matter what the economic predictions are. (Economists are notoriously terrible at forecasting recessions.)
 
If your budget is struggling due to inflation, high interest rates or excessive debt, I recently wrote a blog offering life hacks and solutions.



Sell in May and Go Away
The possibility of higher for longer interest rates isn’t the only reason why now is a great time to rebalance our wealth plan, and make sure that we are properly protected and diversified. The 1st quarter 2024 GDP report (advance) came in at a very slow 1.6%, while 2024 full-year GDP is expected to be just 2%. That isn’t a recession, but it’s very slow growth – particularly given that stock prices are very high on a historic basis. 

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The CAPE ratio, developed by Nobel Prize winning economist Robert Shiller, shows that the only time stocks have been more expensive was in the Dot Com Recession. (Stocks are higher than before the Great Depression and the Great Recession.)

If you would like to have a stress-free vacation this summer, it’s a great idea to rebalance in May before you go away. For many of us, that means knowing exactly what we own and why, rather than just having blind faith that our financial advisor is protecting our wealth for us.
 
I offer an unbiased second opinion. Email [email protected] or call 310-430-2397 for pricing and information. You might also consider joining us at our June 8-10, 2024 online Financial Freedom Retreat where you can learn how to be the boss of your money.
 
“An investment in knowledge pays the best interest,” Benjamin Franklin.
 
Election Year Trends
The election year trend over the last 10 years looks pretty good. However, that’s because it doesn’t include the Great Recession or the Dot Com Recession.

March of 2000 marked the all-time high for the NASDAQ Composite Index, when it topped over 5000. By October 2002, the NASDAQ had plunged -78%. It took 15 years to recover. October 2007 was the market high before the Great Recession. Between October 2007 and March 2009, the Dow dropped -55%, to a low of 6547. When you include those two election years, the election year trend looks bleak on the 20-year and 30-year timeline.
 
Debt Levels
Over half of the S&P500 is at or near junk bond status, including a lot of banks and insurance companies.

 
Companies with higher levels of debt tend to have slower growth. They might pay a high dividend to try to keep investors interested. However, with profit margins squeezed and money expensive to borrow, some might need to cut their dividends (without warning). We’re seeing that happen quite a lot in the commercial real estate industry. Dividend cuts can spark an overnight gap down in share price before investors can protect themselves. We saw this with some bank stocks in 2020 (Wells Fargo) and 2023 (the bank failures), with General Electric in 2017, and of course in the many bankruptcies that occurred in 2008 (auto manufacturing, Lehman Bros.) and 2001 (Enron, telecom).
 
Debt levels and high valuations (nothing is on sale) are some of the reasons why we are underweighting U.S. value funds. There are other countries that offer a higher yield. A few also offer less risk. We cover this in the June 8-10, 2024 online Financial Freedom Retreat. I also discuss this with my private clients.
 
Stock Buybacks
Corporate repurchases of shares have been a major boost to stock prices for the last 15 years. Buybacks were down -21% in the fourth quarter of 2023 from the trillion dollar high set in the 12 month period ending in June 2022. You might recall that stocks dropped -26% in 2022. This had a lot to do with a curtailment of the stock buybacks, from banks, car companies and oil corporations looking to conserve capital.
 
Howard Silverblatt, the senior index analyst, is forecasting that share buybacks might increase in 2024 over last year, perhaps even as high as $900 billion for the year. This is positive for stocks, but might be complicated by the “higher for longer” interest-rate scenario and the current distress in the commercial real estate market, which could spill over to the banks. Mega banks are some of the most robust purchasers of shares. Apple is number one with $23.5 billion shares repurchased in the 1Q 2024.
 
The bank stress test results will be released by the Federal Reserve Board in June. The Financial Stability Report was just released a few weeks ago.
 
Why Rebalancing is so Important
If you look at the chart below, you could make a case for rebalancing or for Buy & Hold. However, when you look at the full 21st Century trends, the case for Buy & Hold doesn’t hold up.  

5-year performance of the S&P500. (c) Microsoft. Used with permission.

We tell ourselves (and the media/broker/salesmen also tell us) that we just have to buy and hold. However, when stocks drop by half or more, (the Dow Jones Industrial Average hit a rock bottom of 6547 on March 9, 2009), many are so distressed over the loss of wealth (and credit rating and perhaps even a home) that they are tempted to sell to stop the losses. Regular rebalancing would prompt us to add more at a lower price, and we’d have the money to do that because we would have kept at least a percent equal to our age safe from the equity losses. Most people don’t buy low because they can’t.

Over 20 million homes were foreclosed on before, during and after the Great Recession.

Rebalancing regularly allows us to protect and diversify our wealth – to capture gains at the high, and add more when stocks head south. We always want to keep an age-appropriate amount safe, and to know what is safe in a Debt World. (The bond market is very tricky, but it’s possible to get a safe 5% return, if you are mindful about it.)
 
Most of us have more in our retirement account then we could earn in many years of working. So, protecting our wealth now, while stocks are at an all-time high, is a great idea. We want to fix the roof while the sun is still shining. When we wait for the economic storms to hit, we have to hope and pray to recover losses. That is very damaging for our FICO score, and could put us at risk of losing other important things, including our home. Investing the time and money necessary to batten down the hatches on our personal wealth now could be the best job we undertake in 2024.
 
If you’re a DIY type, then join us for our June Financial Freedom Retreat to learn and implement time-proven wealth strategies that earned gains in the Dot Com and the Great recessions, and outperformed the bull markets in between. If you’re a busy professional, then consider getting an unbiased second opinion from me personally now.
 
Is Warren Buffett a Buy & Hope Investor?
A lot of pundits cite Warren Buffett as a model of Buy & Hope. However, Warren Buffett is not a Buy and Hold investor. Buffett is a value investor who takes profits opportunistically. He quite famously dumped all of his General Electric stock just a few months before the dividend was cut. While Warren Buffett still has Apple as Berkshire Hathaway’s largest holding, the company sold 126 million shares of Apple stock over the last two quarters. Apple’s year-over-year revenue performance was a decline of -4.3% in the most recent quarter. Sales in Greater China was down -8%. (Click to learn why.)
 
It is rare for the Federal Reserve to print up $5 trillion to ensure that we don’t have a recession, as happened in the pandemic. The secular bull market that we have been in since 2009 has been fueled by excessive debt, which has a lot of people very concerned. When we’re properly protected and diversified, we can sleep better at night knowing that we’re not going to wake up with -55 or -78% losses in our stock portfolio or -26% losses in our bond portfolio. (The S&P500 dropped 35% in the pandemic in less than a month.)
 
A lot of people are concerned about bank debt, the U.S. dollar, BRICS, etc. There are strategies for these concerns as well. You can read about them in my blogs, videoconferences and books. (Email [email protected] and indicate what topic you’re interested in. We’ll point you in the direction of a free blog or videoconference.) You can learn and implement our time-proven easy-as-a-pie-chart nest egg strategies at our June 8-10, 2024 Financial Freedom Retreat. You can get more personalized attention in my private coaching.
 
Bottom Line
There’s a reason why “Sell in May and go away” is such a time-worn market aphorism. However, a better way to think of it is “Rebalance in May and go away.” We’ll have a better vacation if we’re confident that our wealth is protected from any market mayhem that might startle the markets over the summer.

Join us for our Online June 8-10, 2024 Financial Freedom Retreat. Email [email protected] or call 310-430-2397 to learn more. Register by May 6, 2024 to receive the best price and a 50-minute private prosperity coaching session. Click for testimonials, pricing, hours & details.

Join us for our Restormel Royal Immersive Adventure Retreat. March 7-14, 2025. Email [email protected] to learn more. Register by May 30, 2024 to receive $200 off the regular price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two and three 50-minute private, prosperity coaching sessions!

Natalie Pace at the Ritz Carlton in Powerscourt Ireland. Photo by Marie Commiskey.

Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. 
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.​

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Check out Natalie Pace's Substack podcast on Apple and Spotify.
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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.