Sector Rotation Intensifies as we Approach the Seasonally Weak April-May Period

“Sell in May and go away” is a well know Wall Street adage that warns investors to sell their equity holdings in May to avoid the seasonal decline of the equity markets. Will the adage prove to be true in 2014? After the outstanding returns of the last 18 months, is the U.S. stock market vulnerable to a serious correction?

We think that the risks for equities have increased and investors should be extremely cautious in this market. As we noted in previous blog articles, the sector rotation has started a week ago and a correction is under way in the previous market-leading sectors, such as biotechnology and gold. At the same time, defensive investments, including utilities and treasury bonds are in favor again. Geopolitical risks may be on the rise, as well, especially if the military conflict in the Ukraine escalates in the coming weeks.

Severe corrections are under way in the biotech and gold sectors:

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At the same time, defensive sectors, such as utilities are gaining favor with investors:

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Source: FidelitySignal.com

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3 thoughts on “Sector Rotation Intensifies as we Approach the Seasonally Weak April-May Period

  1. Interesting post! I agree with your view on stocks, although from a different angle. I analyze the S&P 500 futures and I believe the move up from the start of February was driven mostly by small investors which has played out now and should lead to a correction in the short term. Good luck with your trading and your blog.

  2. Pingback: Market Correction: Treasury Bond Fund is Trending Higher; Biotechnology Sector is at Oversold Levels and May See a Bounce Next Week | Fidelity Trends

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