Sell in May and Go Away: Is the Market Primed for Possible Downturn?

There is an old saying on Wall Street: Sell in May and go away. It refers to the tendency of stocks to perform better during the November through April portion of the year, and not as well during the May through October chunk of the calendar. This year, the adage might hold even more sway, as investors face more than just the summer doldrums. The Fed will announce its plans for the coming months in a meeting Tuesday and Wednesday. Fed Chair Ben Bernanke will hold a press conference after the meeting, presumably to explain the thinking behind whatever the Fed decides to do. Investors are watching the meeting closely, trying to read the tea leaves and predict whether the Fed will continue its quantitative easing plan through June, or end the program early. Fears around inflation and a lower dollar have stoked rumors that the Fed might consider ending QE2 early. If that happens, the Fed's propping up of the economy would also end, driving stocks down anywhere from 10 to 25%. The end of QE2 might also pull the rug out from under the economy, possibly stoking another recession. Add to this mix the uncertain world oil market, uncertainty in the European debt markets, and the general sense on Wall Street that a correction is coming, and it becomes easy to see why some analysts are preparing to time their spring sells and fall buys. Maybe it's the warm weather. Maybe it's the cool beer and the sea breeze. Whatever the case, when your days resemble Jimmy Buffett more than Warren Buffett, it might be time to duck out of the market for a while.