This Near-Perfect Indicator Says Investors Should Buy Stocks Now
It’s an old cliché… but it’s often true…
Sell in May and go away.
The idea is investors should avoid the stock market from May through September. Stocks tend to underperform during this time frame.
This year, the indicator has been dead-on. But I think it’s about to change…
Stocks are down about 5% in May – declining 11 out of 13 trading days this month.
We saw even bigger declines in 2010 and 2011. So investors would have been wise to follow the old advice.
But another indicator says investors should be buying stocks on this pullback.
It’s called the election year indicator. In November, our presidential election will take place. During election years, the stock market has risen by an average of 11% dating back to 1928. And June, July, and August are – by far – the best-performing months during an election year.
#-ad_banner-#More important, stocks have only had three negative years over the past 21 election cycles.
There’s also a common sense element that goes into this indicator. During election years, it’s in the best interest of the current administration to do everything in its power to prevent stocks from going lower. After all, Americans usually vote with their wallets.
Billionaire investor Jim Rogers put it best on S&A Investor Radio a few weeks ago. That’s a free weekly radio show where I interview some of the smartest analysts on Wall Street.
Rogers is known for being extremely bearish on stocks. However, he’s bullish on stocks in 2012. He expects the current administration “to print money like crazy in an effort to get reelected.”
After the recent market pullback, stocks are only up 3% on the year. The election year indicator says that should be our maximum downside. On the upside, we’ve got a shot at 8% or more.
Based on the election indicator, it may be time to buy stocks and stick around.