May 4 (Bloomberg) -- U.S. investors should stick with stocks and ignore the axiom of “sell in May and go away,” according to David Bianco, UBS AG’s chief equity strategist.
“Hold on for further gains in May,” Bianco wrote in a report dated May 1. Seasonal patterns are “a weak force” by comparison with the economy, which is showing “clear signs of improvement,” the report said.
The CHART OF THE DAY shows the average monthly returns for the Standard & Poor’s 500 Index since 1950. For May through October, the figure is less than 1 percent each month. Averages for November through April exceed 1 percent in every month but February.
Data on initial claims for jobless benefits, manufacturing and consumer confidence justify the gains in stocks since March, Bianco wrote. “Reduced risk of bank nationalization” is in the market’s favor as well, he added. The S&P 500 rose 30 percent from its March 9 low through the end of last week.
Bianco stood by a projection that the index will surpass 900 by the end of this month. The index hasn’t closed above this threshold since Jan. 8. He also repeated a year-end estimate of 1,100, leaving him tied with JPMorgan Chase & Co.’s Thomas J. Lee for the most optimistic view among 11 strategists in a Bloomberg News survey.
The figures in the chart were compiled by Plexus Asset Management and cited in a report by John Mauldin, president of Millennium Wave Advisors LLC, whose outlook on stocks differed from Bianco’s.
“There are times when you should be cautious and times when you should throw caution to the wind,” Mauldin wrote in the May 1 edition of the weekly newsletter, Thoughts from the Frontline. “I think this is the former.”
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