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Sell in May and Go Away?

Investors fought off headwinds at the beginning of last week, including a previously discussed surprise shock from the swine flu epidemic, which has thankfully begun to fade, continued postponements of the bank stress test results, a weaker than expected 1st quarter 2009 Gross Domestic Product (“GDP”) report and the Chapter 11 filing and restructuring plan of Chrysler.

However, recent Federal Reserve’s minutes revealed a more rosy than expected U.S. economic outlook and positive economic news surfaced late last week from the Institute of Supply Management (“ISM”) as well as the Economic Leading Indicators. All of these data points gave the market more strength and growing confidence with the week ending with, according to Morningstar, the Small Cap Russell 2000 index increasing 1.77%, the Mid-Cap S&P 400 index rising 1.59%, and the Large Cap S&P 500 Index gaining 1.33%. Outside of the U.S., the International MSCI EAFE NR Index, in U.S. Dollar terms, jumped 4.49% and the Emerging Markets MSCI EM Index, in U.S. Dollar terms, was up 2.32%. Investor’s Business Daily (“IBD”) noted that the NASDAQ’s 12.2% rise for the month of April 2009 was its best monthly showing since October. Additionally, once again according to IBD, the S&P 500 index and the Dow Jones Industrial Average (“DJIA”) closed the month of April 2009 up by 9.0% and 7.4% for the month respectively.

All of this would seem to suggest that a durable recovery rally is starting to take form. Perhaps the age-old Wall Street notion of “Sell in May and Go Away” will not be an appropriate course for 2009. While this may be the case, we observe that there are still some potential bumps in the road ahead in terms of the ultimate bank stress test results, remaining corporate earnings announcements, the Private-Public Investment Program and future, potential stimulus packages. For these reasons, we, at Hennion & Walsh, remain cautiously optimistic over the short-term and increasingly optimistic over the medium-long term in terms of stock market growth potential within a diversified portfolio strategy.

Please note:  Past performance is not an indication of future results.  The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. You cannot invest directly in an index.