Too soon to jump on ‘sell in May and go away’ bandwagon: BMO strategist

Investors have been transitioning away from fear surrounding the coronavirus to focus more on stocks and fundamentals, says a top market strategist.

“The thing that’s gone on the most over the last couple of weeks is … this transition into a ‘more normalized ways of looking at the market,’” Brian Belski, chief investment strategist at BMO Capital Markets, told Yahoo Finance.

“How many people are going to be going to a bar, how many people are going to go in a restaurant, how many people are going to be on an airplane. We can measure that and we can, we can invest around that,” said Belski.

He believes for a while some investors, strategists, and economists were too driven by fear and rhetoric.

“Some of these projections with respect to Q1 and Q2, albeit probably accurate in terms of how negative they are, but I think a little bit too bombastic on the negative side…nobody knows,” he added.

On Friday, May 1st the Dow (^DJI) and S&P 500 (^GSPC) were selling off and ended just above their session lows after closing out April with their best monthly gains in decades.

“A lot of my calls and conversations today are really quizzing me whether or not this is a ‘sell in May go and away.’ I just think that it’s way too soon to be jumping on that bandwagon,” said Belski.

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A person walks at the Wall Street subway stop on April 23, 2020 in New York City. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)

‘Forecasting tools are very very difficult right now’

Many companies are not providing guidance for the quarter or full year, making it difficult to forecast performance.

“We’ve looked at more trailing earnings, quite frankly,” said Belski. “You can’t really make an assessment until the second half of this year.”

On March 23, BMO told investors it was suspending its S&P 500 (^GSPC) and EPS year-end target on a calendar basis and moving it into a rolling 12-month basis.

“We can’t really, as an investor base, let alone companies, get a good feel for what the earnings actually are until they happen. Forecasting tools are very, very difficult right now,” said Belski.

He believes investors will see more real valuations in 2021 and 2022.

“So therefore, less about May 1st, ‘sell in May and go away,’ but more about what the trajectory and the trend is,” said Belski. “We still think given the fact that the United States has the best companies in the world, they are in the best position to kind of get through this because they have before and they will again.”

Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre

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