The markets have seen a run-up of over 40% since their lows in March. According to Bespoke Investment Group the S&P has reached its highest P/E since the end of 2004, due to a combination of market optimism without the earnings to support it. It may be getting very difficult to find value plays out there as a result. There may be hope yet though for those of you who wish you had jumped on the many opportunities back in March.
A recent article by my friend and professor Dr. George Athanassakos brings to light the oft spoken phrase - sell in May and go away. According to Dr. Athanassakos there is no reason to believe this year will be any different than what has been seen on average over the past 50 years. Even though the recent bull market has coincided with the beginning of the notoriously difficult May to October period "we are not out of the woods yet", as Dr. Athanassakos says. Due to various market behaviors, which can be read about in the article, it may be time for institutional money managers to lock in their profits from the recent rally. He also points out that September and October are traditionally two very volatile months.
Supporting Dr. Athanassakos' views is the fact that the consumer has some heavy lifting to do for earnings to catch up to the recently inflated price levels. That may be a stretch in the midst of consumer concern over high unemployment rates.
While many opportunities to invest in solid value back in March may have been missed, opportunity may present itself again sooner than you think. I wouldn't go anywhere just yet.
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