Market Hits A New High As "Sell In May" Arrives

In The News...

Interest rates held - The Federal Reserve did not increase its target lending rate (Federal Funds Rate), opting to keep it at 0.75% rather than increase it to 1.00%. Language coming out of the Fed's meeting last week was apparently enough to boost expectations that a rate increase will occur in June. The Fed likes to telegraph its moves, so I would be inclined to believe it. The most obvious impact these actions have are on short-term savings or loans, as those rates most closely mirror the Fed's actions.

Apple is cash king - For all the crap that Apple received in recent years for failing to innovate, we should admire their fiscal responsibility. Apple is notorious for hoarding cash, which has begged the question of what they would do with it. In the quarterly earnings call Apple announced a 10% dividend increase. The new, total dividend Apple will pay annually, $13.2 billion, is more than one-third of the companies in the S&P 500 are worth. Here is the full story.

Know your Social Security - A recent article in Time showed that fewer people are tapping Social Security retirement benefits when they first come available at age 62. The survey of 61-year-olds, done by Fidelity, found that 28% planned on taking early benefits, compared to 45% back in 2008. Of course the economy was on the cusp of recession back in 2008, but the decline is still encouraging. The closer you get to age 62 or your normal retirement age (which is 65, 66 or 67 depending on the year you were born), be aware of your options as they are nuanced. It is important to maximize your payout in retirement.

A lifeline for landline? A government study found that 46% of U.S. households have landline phones. I am not sure if this number is more or less than I would expect, but it's interesting. 50% of homes have cell phone service only.

In The Market...

The S&P 500 rose +0.7% last week. Let's look under the hood...

(data source: Yahoo Finance)

Stocks: Financials and Technology led the way, rising more than +1.0% apiece. Real Estate and Energy were again the lagging sectors. We own Real Estate (VNQ) in certain accounts, and while I do not like the short-term movement within the sector I remain bullish about the long-term view. The Real Estate fund we own also pays a 4.4% dividend, which helps soften the blow of a couple down weeks.

New high: The S&P 500 closed just shy of 2,400, marking an all-time high that eclipses the previous high set back in February. This matters for a couple reasons. First, all-time highs are bullish. Second, the S&P index does not account for dividends, which makes a new high look even better. This sets up pretty for well for the coming weeks, although the summer months do pose some risk (more on this in Opinion below).

Bonds: We did not learn much last week about the bond market. Most bond types were slightly negative, while preferred stock (we treat as a bond) did squeak out a small weekly gain. I still think Treasury bonds (TLT) will rally sometime soon. This would mean lower interest rates, as most predict rates to continue moving higher.

Here is why... Below is a chart of a widely owned long-term Treasury fund (TLT). This current point in time sure resembles late-2013 and late-2015, periods right before the bond market staged a massive rally. Take a look:

(chart created via

To be clear I don't think Treasuries are a "buy" just yet. But we are close. It doesn't seem right that bonds would take flight again after years of historically low rates. Popular opinion believes rates will continue to rise, not fall again. However, the data is what it is. History suggests long-term bonds may become very appetizing in the near future.

In Our Opinion...

May has arrived, bringing with it the popular question: Sell in May and go away?

This refers to the seasonal investing strategy of selling stocks this month, in anticipation that the market will tumble. While there is not a ton of statistical merit to support selling in the month of May, it really speaks to a broader seasonal trend that stocks perform much better in the fourth and first quarters, October thru March, than they do the second and third quarters, April thru September. (You will have to take my word on this -- I'll try digging up the specific stats in a future post. It is stark how superior Q4 and Q1 are compared to the rest of the year.)

So, should we care about "Sell in May"? No, not really. For one, the market remains strong on a long-term basis, as defined by looking ahead in weeks and months. Second, if we did see a sell-off I would still be looking for opportunities to invest, most likely in defensive stock sectors and bonds. Third, and most importantly, I do not think buying or selling based on a seasonal trend alone makes for much of an investment strategy.

Market volatility does tend to increase during the summer. Kids are out of school so families are on vacation, and thus, market activity slows. This gives sellers a bit of control. We will continue to evaluate market trends and adjust accordingly, as we always do.

In Our Portfolios...

Stocks: No changes last week. I really like the Industrials sector (XLI) right now, but do not feel it is worth selling any of our key stock positions to buy XLI just yet.

Bonds: No changes last week. I remain bullish preferred stock (PFF) and high-yield bonds (JNK), two of our current holdings.

Q&A / Financial Planning...

What do I need to do about my TD Ameritrade account?

A few of you have asked about next steps regarding TD Ameritrade. The answer is nothing. I will send you one more Docusign email that contains the transfer request, to move your account(s) from Scottrade to TD Ameritrade. Once that is complete I will provide log-in instructions for you to view your TDA account. I anticipate most accounts transferring over to TDA toward the end of this month.

For taxable accounts (namely non-IRA accounts), the cost-basis information will transfer over soon after your holdings do. This should result in receiving just one Form 1099 at year-end. Traditional IRA accounts do not need to worry about cost-basis information, as only withdrawals are taxed. Roth IRA accounts do not need to worry about either.

Let me know if you have questions.

What's New With Us?

I am mixing things up a bit. I am going to start sending these weekly recaps on Friday, as opposed to Monday. That way, for those of you who regularly read these, the market-sensitive information will be as real-time as possible. For those of you who occasionally read these but only as work/life accommodates, perhaps the weekend will present a bit more opportunity to do so. And for those of you who never click through to read these, well, you will not be reading this anyway... :)

I am always interested in your feedback -- what you like or dislike, topics you would like me to discuss more, the day of the week or time of the day you prefer getting these, etc.

Have a great weekend,


Brian E Betz, CFP®