By John Stewart
Chief Investment Officer at Farmers Trust Co.

Week in Review: Tech Goes Parabolic

The biggest tech companies have been reporting earnings over the past couple of weeks.

The market was expecting good news given the market’s run up prior to the earnings reports, and the market was right – the news was indeed good.

The S&P 500 has now rallied more than 10% in the past month to reach new all-time highs, while the tech-heavy NASDAQ is up more than 17% over the same time frame – also a new all-time high.

With earnings season starting to wind down, we have a pretty clear picture of first quarter earnings growth. The companies that have reported so far have delivered year-over-year earnings growth in excess of 20%! Quite incredible.

Over the short run, the stock market can do pretty much anything – and it doesn’t have to make sense.

Over the long run, the market has always trended higher.

The implication is that any money you plan on needing or using anytime soon probably shouldn’t be invested in the stock market.

Money that you won’t need for a long time probably should be invested in equities, with one caveat …

If you’re going to panic and sell when the market goes down, you may need to rethink your approach to investing – and it might involve accepting a lower rate of return over time.

Looking Ahead: Sell in May?

There’s an old market adage that says to “sell in May and go away.”

This advice arose from a historical seasonal trend in which stocks underperformed during the summer months.

The only problem, which really isn’t a problem at all, I suppose, is that stocks have actually been doing very well in the summer months for quite some time now.

The long-run average for stock returns between Memorial Day and Labor Day has been around 1.7% – higher during that period about 70% of the time.

But since 2009, the average Memorial Day to Labor Day return has been 2.6%.

There are plenty of reasons an investor may want to sell, but the calendar flipping to May is certainly not one of them.