Should You 'Sell in May' in Europe?
When contemplating stock positions for the summer, investors are often advised to "sell in May and go away," as the saying goes.
But the financial auspices in Europe are divided on whether dumping stocks this month is a wise move for 2008.
If you’re an active investor or short-term trader, there are some great opportunities out there, as long as investors remember "these are bear market rallies," Jacob Schmidt, of hedge fund advisory company Schmidt Research Partners, told CNBC Europe.
Overall the market is neither cheap nor expensive, just volatile, Schmidt said on "Worldwide Exchange" Friday. Intraday moves in individual stocks are averaging percentage points almost every day.
"For midterm investors it will be very hard to decide whether it's a good time to invest," he said. “Overall, we don't think these are good levels to buy at, and long-term investors should be very careful about catching the falling knife."
He cited JP Morgan, which is currently trading at comparable prices to those before the credit crisis.
"We don’t think that's healthy; other tech stocks in the US are also too near levels at the top," Schmidt said.
FTSE to Could Weather the Storm
In Britain, James Bevan, chief investment officer at CCLA Investment Management, said the FTSE-100 could easily escape any follow-through from a UK downturn. With almost 70 percent of sales coming from overseas and 24 percent of sales from emerging markets, he says the FTSE always tends to outperform as the pound weakens.
But while Bevan is bullish on industrial commodities and emerging markets, which favor FTSE fundamentals, others fear the commodity bubble could be about to burst.
"The big trade for the moment has been short dollar, long euro and commodities," Schmidt said. "We think this has now been reversed."
One of the commodity bubble's main drivers has been speculative length stemming in a large part from ETFs, he said. With strength returning to the dollar those flows could easily be suspended if not totally overturned.
Away from Commodities, Into Utilities?
Steven Mayne, head of research at Montague Pitman Stockbrokers, agreed that there's credence in moving away from dollar-priced commodities and commodity stocks at the very least.
That said, for short-term investors packing your bags and moving out completely could result in missed opportunities, Mayne told "Europe this Week."
"The old adage was useful in past years as long-term equity trading was more prevalent," Mayne said. "But with the increasing use of derivative products traders are looking to speculate on upwards and downwards in the markets."
With markets likely to remain choppy throughout the summer, the case for day-traders to hang about and ride the highs and lows is solid, he added.
The same goes for clever longer term stock pickers, Bevan said. There are plenty of opportunities in stocks like Diageo, Reckitt Benckiser and Tesco, as well as utilities like Scottish and Southern and United Utilities .