Sell in May?

Today is the last day of April, which makes it the perfect time to bring up the old investing adage "Sell in May, and then go away." The idea is that stock prices tend to go on a bit of a summer swoon, so investors would be wise to be out of the market during that time, and return to stocks in October or November.

It turns out there is some wisdom to the old saying. Since 1950, the S&P 500 has increased in value by an average of just 0.1 percent in May. It's flat in June, up an average of 0.9 percent in July, flat again in August, then down by an average of 0.5 percent in September. Prices then start to come back in October, rising by an average of 0.7 percent.

"Sell in May" is certainly an overstatement, though. Although stock prices are indeed historically unimpressive over the summer, they still rise by an average of 0.2 percent over those five summer months. Although those returns aren't exactly robust, it's still best to remain in the market.

Shelling Out for Prom

Do you have a son or daughter who is planning on attending their high school prom this spring? If so you better pull out your wallet, because the price tag for prom is spiraling ever higher. According to a survey taken by Visa, teenagers going to prom are expected spend an average of $1,139 this year.

According to David's Bridal, a leading seller of prom dresses, the average amount that a high school girl spend on a dress there is $170. Spending by boys fluctuates much more, but in the end, it's about the same: Men's Wearhouse says its tuxedo rentals run anywhere from $60 to $200.

Of course, some kids manage to attend prom for a lot less money than that. According to the Visa survey, 12 percent of high schoolers said they wouldn't be spending anything on prom.

First Look at GDP Growth

The Commerce Department released its first estimate of GDP growth for the first quarter of 2013 this morning, and we seem to have settled into a new normal, with the annual growth rate coming in at a somewhat modest 2.5 percent. The good news is that sequestration and the increase in the payroll tax don't seem to have had a huge effect on economic growth yet.

The largest driver of that growth was consumer spending, which rose a solid 3.2 percent in the quarter. That's the biggest increase we've seen since the last quarter of 2010. One area for concern was nonresidential fixed investment, which is mostly long-term business investments. Those increased by 2.1 percent in the quarter, which was positive but also a sharp slowdown from the 13.2 percent increase we had seen in the previous three quarters.

This is just the first estimate, and it will be revised as more figures come in. Look for a revision of these numbers to be issued by the Commerce Department on May 30.

What's Driving the Wealth Disparity?

The American economy has technically been in recovery for four years now, ever since it began growing again in 2009. While net worth overall has been growing since then, a new study from Pew Research shows that the bulk of the benefits have gone to the wealthy.

From 2009 to 2011, the average net worth of households in the wealthiest 7 percent rose by around 28 percent. Meanwhile, those households in the lower 93 percent saw their average net worth drop by an average of 4 percent.

There’s actually a very simple explanation for why this has happened. The stock market has been doing very well over the past four years, and that’s the source of much of the wealth for the nation’s wealthiest households. On the ther hand, more middle-class people have much of their wealth tied up in their home – and as long as housing prices were depressed, their net worth has been suffering along with it.

Another Flash Crash

In case you missed it, there was a brief crash in the S&P 500 yesterday afternoon following a report of a terrorist attack on the White House. There was no such attack, of course; it turned out that the Twitter feed for the Associated Press had been hacked. But the news was alarming enough to send the S&P down by more than a thousand points and temporarily erase $136 billion in value from the index.

The whole thing was over with very quickly, with the AP announcing the hack and the markets returning to normal within three minutes. The S&P finished the day up 1 percent overall. But the incident pointed up how precarious our markets are in these days of instant computerized trading.

There was a similar situation involving Google’s stock on Monday. Somehow automatic trading systems triggered a sell signal, and the stock lost 3 percent of its value – dropping by 21 points – in an instant, then popped right back up to its previous level. The whole episode was over in less than three quarters of a second. No one is quite sure what caused that crash.

Entrepreneurship in the Recovery

One interesting side effect of the economic recovery is the impact it has had on business creation. By one key measure, entrepreneurship has actually declined in the past couple of years: In 2012, 0.30 percent of all American adults started their own business, while that number was 0.34 percent in both 2009 and 2010.

The biggest reason for this is probably the dislocation that takes place during a recession. Fewer businesses are hiring, so people with nowhere else to turn are more likely to take a chance on starting their own business. In that sense, the number of people starting businesses can be taken as a contrarian indicator of economic health, or the lack thereof.

Whatever the reason, the rate of entrepreneurship is now back down to where it was prior to the recession. Today’s 0.30 percent figure is exactly the same as it was back in 2007. By that light, it can be said that entrepreneurship in the U.S. is now back to normal.

Dividends on the Rise

Are you a dividend investor? The low yields being paid out by bonds these days have focused increased attention on dividend-paying stocks, which allow many investors to get the income they used to get from bonds while also taking advantage of the capital appreciation that stocks provide.

Investors have traditionally looked to large, well-established companies for dividends. Among companies in the Standard & Poor's 500,  some 81 percent of them are now paying a dividend.

But the phenomenon is growing among smaller stocks as well. According to S&P Dow Jones Indices, some 46 percent of all companies that are too small to get into the S&P 500 are paying dividends as of the first quarter of 2013. That's up from 42 percent for the year-earlier quarter.