This saying evolved from the stock market’s tendency to perform better during the November to April time period and underperform during the May to October time frame. While Nevada Retirement Planners strongly opposes strategies aimed at timing the market, it is still interesting to monitor these historical trends. This May did not follow the old adage; rather it was a continuation of the bull market leading up to this month. While this particular bull market has many skeptics and non-believers, the numbers tell the real story as the S&P 500 and the Dow Jones Industrial Average reached all-time highs during the month.

The rise in equity prices has been a global event, but U.S. stocks led the charge in May. The outperformance of the U.S. markets has been fueled by a variety of factors. The financial crisis in the U.S. is approaching its five year anniversary while the banking and sovereign problems is Europe are more recent events. The U.S. Federal Reserve implemented multiple quantitative easing programs to pump enormous liquidity into the financial system. These aggressive moves have been well received by the stock market. The U.S. consumer, after significant personal deleveraging, is now more confident and beginning to drive economic growth in housing and retail sales. The fundamentals of U.S. businesses are also very positive with solid corporate earnings supporting current stock valuations. The U.S. economy is on better footing relative to many other countries.

Interest rates quickly pierced into a new trading range causing price deterioration. This was most notable in the U.S. Treasury market and especially in longer maturities as interest rates rose as the yield curve steepened. The credit sectors (mortgage-backed securities, investment grade corporate bonds and high yield) outperformed Treasuries as credit spreads continued to compress. Despite the spread tightening, returns were still negative for the month. High yield bonds are now yielding less than five percent, an amazing historical low level with high yields down over ten percent in the past five years. The party in bonds is winding down. Expect low single digit returns over the next twelve months.

The market’s performance provides some insight, but the most important question is how should your portfolio be positioned in today’s market? Your combined portfolios and investment strategies should be reflective of your personal financial goals, risk tolerances and objectives; not the perceived state of the financial markets. If your time horizon is five years or longer, equities will provide for long-term growth and wealth accumulation. Bonds provide for shorter term financial needs and can control a portfolios overall volatility. Whether stock prices are moving higher or lower and interest rates are increasing or decreasing; the best answer for your portfolio is one that is diversified and properly allocated among the key asset classes. If you have a financial plan and your portfolio reflects your risk tolerance and goals; you are well positioned in today’s market.

For market timers this is a difficult period. Many stock investors are worried about a pullback from the new high water mark. Bulls have been badly burned twice in the past thirteen years as the market pulled back hard in 2000 at the height of the tech bubble and again in 2007 when faced with the financial crisis. Bond investors, after a 32-year bull market, are now worried about low interest rates turning into potential losses if interest rates begin to rise.

For long-term diversified investors the markets are very rewarding and much less stressful. If you stayed invested and tuned out all of the market noise, your diversified investment portfolio likely grew again in April. In our chart below we recap the monthly and the trailing twelve months numbers.

International stocks from developed countries lead the charge in April returning 5.21 percent after many months of underperformance. Companies from emerging markets continued to lag returning a meager 0.75 percent for the month. The S&P 500 continues to be a bright star with a 1.93 monthly return. For the trailing 12 months, U.S. stocks have fared well as the S&P 500 is up 16.89 percent.

The investment grade bond market looked like it was beginning to show some cracks after an amazing 32-year run, but a weak March employment number and hints of continued slow economic growth gave bonds a second wind. In April, long-term U.S. Treasuries lead the way with an astounding 4.00 monthly return. The other sectors of the bond market (corporates, high yield, mortgage-backed securities and intermediate Treasuries’) generated returns around the 1.00 percent level. Bonds are not going to duplicate performance from the past ten years, but they will continue to provide income and general price stability to a diversified investment portfolio.

Our best advice for clients is to stay invested while owning a diversified portfolio of stocks, bonds and a touch of commodities. Unfortunately, we do not know the best performing asset class for next month, next quarter or the next year, but the long-term investor with a diversified portfolio will allow themselves the opportunity to participate in the entire market. Don’t be a bull or a bear, just be invested.

The first quarter started with the one of the most hyped economic/political events in recent memory, the Fiscal Cliff, and we ended the quarter with a near banking collapse in Cyprus. Sandwiched in between these events the U.S. Congress debated sequestration and raised taxes. Despite all of the distractions, corporations continue to grow earnings to record levels and the consumer is healthier and spending more. Behind the scenes, some major U.S. stock markets indices quietly surpassed their historic high water marks.

If you stayed invested and ignored the financial news networks, internet, newspapers and pundits your investment portfolio likely grew in the first quarter and over the past year. In our chart below we recap the numbers. Risk was rewarded again in March and for the trailing twelve months. Large capitalization U.S. stocks were the best performing group while international stocks lagged. Emerging markets had a difficult month and are lagging over the past year, but we see opportunity there in the quarters ahead. Remember, fundamentals drive stock price over time. Corporate earnings continue to grow, housing is rising from the ashes, employment slowly improves and PE ratios are beginning to expand all providing for positive price momentum in equities.

The investment grade bond market is beginning to slow down its pace of appreciation after an amazing 32-year run. This is reflected in the returns of the Aggregate Bond Index and the Municipal Bond Index. It is not the end of the world for bonds, but investors need to lower their future return expectations. Bonds have consistently returned five to six percent over the past ten years and at these interest rate levels expect a one to three percent annual return as we move forward. High yield bonds have enjoyed equity like returns over the past year and this too will slow down in the coming quarters.

Our best advice to clients is to stay invested at a risk tolerance designed for your specific financial situation. The market rewards patient long-term investors. It has over the past five years and it will over the next five years. Find the right combination of investments strategies and you too will enjoy the financial success of being a long-term investor.