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S&P Capital IQ chief equity strategist Sam Stovall breaks down April's ADP report's impact on the markets.
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And it's all right so should you believe the old adage sell in May and go away my next guest wounds where that strategy you could miss out on a somewhat -- joining us now with Sam Stovall chief equity strategist -- S&P capital.
-- -- is saying but let's get to the jobs number -- first study ADP report.
You know can we believe these numbers we'll be talking to Liz -- about that in a minute but does that signify perhaps not a bad number on Friday what does it mean to the markets.
Well I think certainly based on the performance of the markets today investors are a bit concerned that may be Friday's numbers will be softer.
Then the 160000.
That is the consensus estimate.
Our guess is it is probably gonna be around 170.
But still you know not a number that we would like to see this thus far into an economic recovery.
And we're gonna be questioning once again whether the warm weather this winter.
Stole some jobs from April and showed up in the January and February numbers.
Since that -- of the -- not between walk.
Behind why you think may might actually be much better than we thought that the old adage we can sort of put aside for a while.
Well I don't think we should throw away the adage sell in May and then go -- I've never really.
Embraced because they return you get on average from may through October.
Is much much better than you would get in cash.
And actually you've been able to add 400 basis points to your return.
Annually by -- rotating into the defensive sectors of consumer Staples and health -- But I'm thinking that because so many strategists today are being unnerved by the season rolls by the sentiment and the sovereign concerns.
That they're thinking we should sell in May when it might simply turn into -- swoon in June.
But it's interesting you mentioned some of the sectors they are they particularly good because this is a time you are traditionally things slow down.
Is it that what what -- particular sectors that you like during this period -- Well it's not because people like to get hip replacements in the summer time but rather can affect -- as you mentioned that when the period is relatively cautious.
There is correlation with the causation in my opinion meaning that a lot of the capital inflows occur early in the year.
Investors focus more on their hands in their portfolios in the summer.
And if you are gonna bail out of stocks usually wait for the third quarter numbers and hence September is by far the worst month of the year.
So you hide out if you're a long only investment manager.
You really can't go into cash so you hide out in the defensive growth and income areas.
Consumer Staples and health care which provide.
You know basically upward bias but also nice dividend yield -- That's why we're seeing the Dow take the lead in this move right usually it's attack.
You know it's even the Russell a more not seeing this -- have the technology sector we think anybody really leave this if if you wanna call -- rally.
So as a result does that give you pause that maybe this isn't truly real.
Well I'm thinking that it's when the C is get rough investors prefer a larger boat.
And still -- gravitating toward the Dow which offers a nice dividend yield.
Whereas the Russell 2000 small cap stocks.
Tech stocks in general.
Don't typically offer as good -- yield as you would get in the higher yield in sectors so let's face it if you have a dividend yield of 3%.
You can lose 3% in price and still be at breakeven.
Interest and we're not gonna need a bigger boat yes -- Great movie by the way jewels eyes Sam Stovall all of us that they capital IQ saying thank you very much appreciate it.
