The real reason we are rallying: moon cycles. That's what my esteemed friend Art Cashin attributed the rally to. He called for the rally to start today due to "Combining some of the moon phase charting history with a variety of short term cycles..." Shades of Arch Crawford!
But seriously...Art also called my attention to a paper published by the Federal Reserve Bank of New York yesterday, which tried to explain the so-called "equity premium puzzle." In other words, why the average return on stocks is higher than than would be expected to compensate for their riskiness.
The paper concludes: "We show that since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the tweny-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year) — a phenomenon we call the pre-FOMC announcement 'drift'."
Art's response — which I agree with — was: "We thought "Sell in May" was good because it potentially gave you nearly half a year off. Now you only have to show up eight days."
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