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Sell in May and Go Away...Again?

The old adage of "sell in May and go away" applies this year just like it did in previous years as problems that plagued the economy in recent years remain unresolved, Richard Cookson, global chief investment officer at Citi Private Bank told CNBC.

CNBC.com

“I do not think it is different (this time). There are a lot of similarities with last year and the year before the euro zone problems escalating again, the Middle East among others.

"One of the biggest questions we have is the seasonal adjustment of the data. You find that numbers come in better than expected at turn of the year,” Cookson told “Worldwide Exchange”.

Cookson said he himself had taken “a lot of money off the table” and switched from cyclical stocks into defensive stocks.

“We’ve been underweight this year but we increased the underweight a few weeks back. What you find is that the activity surprises come in weaker than expected. So we upped the credit quality of your portfolio, you go into more government bonds,” he added.

However, he said he would not increase his exposure to commodities because of the dominance of China.

“China accounts for 41 percent of global demand for industrial commodities and if China slows further commodity prices fall. It’s as simple as that,” he said.

He said he was not buoyed by the more positive economic news out of the U.S and added it did not change his view.

“In the U.S you’ve managed to eek out the slowest growth, the slowest recovery since the 1930s with the loosest fiscal and monetary policy you have ever seen. The private sector is still deleveraging because of the massive debt mountain that has to be paid off. I’m not sure why you’d be enthused about the economy?” Cookson said.

He argues that the economy was not the only problem facing the U.S it also had a “fantastically expensive” stock market.

“U.S profit margins and profit share of GDP is at record highs. On that basis U.S stocks are twice as expensive as European stocks. It doesn’t cut the mustard for me and there are an awful lot of problems ahead,” he added.

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