Financial companies are sending a signal that U.S. stock investors may be better off without a “sell in May” strategy this year, according to Ari H. Wald, a Brown Brothers Harriman & Co. analyst.
As the CHART OF THE DAY shows, the Standard & Poor 500 Index’s financial stocks are beating the benchmark this year after lagging behind in 2011. The group’s weakness last year preceded five straight months of declines, from May through September, for the S&P 500.
Banks, insurers and other financial companies posted the year’s biggest gain among the S&P 500’s 10 main industry groups through yesterday. Their industry index rose 20 percent, just beating a 19 percent advance in a gauge of technology stocks.
Another favorable sign is that computer-related companies and other groups sensitive to economic swings are market leaders this year, Wald wrote yesterday in a report. Industries less affected by the economy’s performance were top performers through the first four months of last year.
There are indicators of weakness as well, he wrote. The number of 52-week highs in U.S. stocks after subtracting lows is shrinking, investor concern about a market slump has faded, yields on Treasury debt are low by historical standards, and commodity prices have fallen in the past two months.
The slump in these and other market barometers “has not progressed to the point that they support a bearish outlook as they did in May 2011,” Wald wrote. Instead, they point toward a “lack of full confirmation in either direction,” according to the New York-based analyst.
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