History suggests investors will buy the dips



The old “sell in May and go away” line was doing the rounds in the first half of May as stocks sold off, only for markets to quickly regain their losses as the buy-the-dip brigade came out in force.

Further sell-offs may well hit stocks in coming months, but history indicates they won’t be lasting affairs.

Historically, when the S&P 500 is up at least 10 per cent at this time of year, the rest of the year “does really well”, says LPL Research’s Ryan Detrick. Past instances show stocks continued rising 84 per cent of the time, averaging gains of 8.6 per cent – both well above that seen in an average year.

This year might well be different, but momentum is a powerful force in markets. For now, investors remain in buy-the-dip mode.



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