Who Sold in May With So Much Cash on the Sidelines?

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

I spend a lot of time comparing notes with other Wall Street strategists. We’re all obsessed with diagnosing what’s happened in the market in order to anticipate where we want to go.


The best ones agree with me: if you’re already in U.S. stocks, you’re in the right place. There’s zero reason to sell right now.

After all, if you didn’t sell in February, the world no longer looks nearly as bleak. We’re three months closer to coming out on the other side of the COVID-19 crisis.

Vast sections of the country are only in the earliest stages of reopening. Job losses are slowing as more people are getting back to work.


Who Sold in May After Retail Sales Bottomed in April?

As far as I can see, retail sales bottomed out in April and are already on the road to recovery. You don’t sell the recovery. At worst, you hold on.

Smart people have been buying the dip. April was one of the best months in Wall Street history, and May wasn’t bad either.

If you sold in May, you missed a lot of fun. And now that opportunities to trade in May are over, June looks extremely promising.


Dry Powder on the Sidelines

COVID-19 didn’t destroy the global economy. U.S. companies collectively took in more money in the first quarter than they did previously, which is a long way from the total zero-revenue catastrophe that some people predicted.

Let’s take a moment to reflect on that detail. While the pulse of growth wasn’t evenly distributed, there was enough of it to balance truly dismal numbers from airlines, hotels, mall-only retailers and other stocks at the center of the storm.

Exclusive  How Joe Biden Made You 4.4% Poorer

Admittedly, operating under these conditions was expensive. Profitability took a big step back and is unlikely to start rebounding until early next year.

Who Sold in May, When Big Profits May Not Be Far Away?


But investors don’t mind. We’re willing to wait another six to nine months for the numbers to start moving in the right direction again.

And if you aren’t willing to wait, there’s no real reason for you to be in stocks at all. That’s all right. Where are you instead? What is your route to building wealth and protecting what you already have?

Sure, money is safe in the bank… unless the Fed needs to print so much cash that the buying power of every dollar deposited starts to erode.

Zero-interest rates are the natural enemy of passive savers. You’re lucky to earn 1.3% in a top-rated savings account these days, barely 1% above persistent inflation.

If inflation accelerates, you’re locking in a long-term loss. Treasury debt is even worse. Everyone owning any government securities maturing before 2025 is going to end up with less than what they started with once inflation settles the accounts.

Who Sold in May, With Money Waiting to Be Put Into Play?


And that’s the heart of my argument. A staggering $4.8 trillion is currently parked in a combination of short-term Treasury bills and other money market investments that translate to “cash.”

Cash hates being sidelined. Money wants to get back to work. Sooner or later, a big piece of that $4.8 trillion is going to come back to stocks to seek real returns.

Exclusive  This Forecasting Tool Hasn’t Been Wrong in 65 Years, and Is Flashing Red

I wouldn’t be surprised if we see as much as $1 trillion flood Wall Street in the next six months. That’s easily enough to float the S&P 500 back to February levels, even if the companies behind the stocks do no work on their own to justify it.

All we need is for nervous investors to realize that the worst is over. They aren’t doing themselves any favors, especially when the Fed makes it very difficult to settle for near-zero or even negative real returns.

The world hasn’t changed that much. Greed and envy still dominate most investors’ thinking. It isn’t enough to be rich. You need to get richer. It isn’t enough to get richer when other investors are getting rich faster.

Maybe a lot more than $1 trillion is in play here. These are the investors susceptible to swings in sentiment. When the market crumpled, they flinched.

The Fed can deploy a lot more than $1 trillion without blinking. Every time the Fed moves to support an area of the market like municipal bonds or mortgage securities, the implied risk for investors goes down.

And when risk goes down, implied returns drop with it. My strategist friends don’t want to be in municipal bonds or mortgages while the Fed is in control because there just isn’t a lot of opportunity to make real money there now.

You won’t lose money, but you won’t make money either. We like to make money. What about you?

Animal Spirits Aren’t Dead

We talk about the Fed, inflation and the global investment environment every week on my Millionaire Maker radio show. If you haven’t been listening, you might’ve found yourself trapped on the sidelines and watching while U.S. stocks staged their biggest rally in ages. (Click here for recorded episodes and local stations.)

Exclusive  Five Aerospace-Defense Stocks to Buy as Conflicts Combust

We also talk about innovative companies that have so much energy and creativity on their side that the COVID-19 outbreak was only a footnote in their growth curve.

I was just talking to a reporter about the latest numbers from Roku Inc. (NASDAQ:ROKU). The company derives 72% of its revenue and 93% of its profit from advertising and other services now.

The outbreak was bad for a lot of advertisers. Roku’s management noted that “travel, quick-serve restaurants, theatrical and automotive” canceled or postponed big ad campaigns last quarter.

Television advertising markets may never recover. Roku doesn’t mind. Despite all the disruption, advertising revenue is still up 73% from last year and only down 11% quarter to quarter.

That’s a truly vibrant business model. They are poised to take advantage of the new post-quarantine world. The future belongs to companies like this.

I could name endless others. Shopify Inc. (NYSE:SHOP) and Chewy Inc. (NYSE:CHWY) are transforming online retail, taking stocks like PayPal Holdings Inc. (NASDAQ:PYPL) along for the ride.

These aren’t airlines or old-school hotels. The virus didn’t hurt them. It only accelerated their leap to glory. Shareholders are cheering now. And if you want to get ahead of the curve, GameChangers is the place to start.

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader


Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle


DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops