Summer has officially kicked off and investors can feel the heat in the bourses. This is because summer months (from May end to early September) have been historically weak for the stock markets with sluggish trading volumes.
True to the most popular trading proverb “Sell in May and Go Away” investors feel the lazy summer lull during these months. Most of the investors believe in this old saying and might want to avoid the seasonal decline in the stocks. Additionally, current economic fundamentals have been signaling a huge volatility and uncertainty in the coming months.
This is especially true as a raft of upbeat economic data and an accelerating job market indicate that the world's largest economy is improving after the first-quarter slump. This has raised speculations for the first rate hike since 2006 sometime later in the year. On the other hand, disappointing consumer spending data, weak consumer sentiment in May, and downward revision to the first quarter GDP growth raises questions on the health of the economy.
Further, the U.S. dollar – the major culprit of the revenue weakness in Q1 –resumed its rally in recent weeks while oil price might fall in the days ahead on deteriorating demand/supply trends. Moreover, an aging bull market, lofty stock valuations, as well as the Greek debt drama are weighing on investor sentiment.
In such a backdrop, investors could be well served by looking at the ETFs of the top-performing sectors.