Sell in May and Go Away
A lot of things the industry is confident about right now look a tad shaky from my perch, let's cover a few that stick out to me.
I've been banging on about tech concentration all year because every active manager tells me it's the problem yet the inversion is worth stating plainly.
Meta told us in the Q2-25 call that their AI-powered recommendation model drove roughly 5% more ad conversions on insta and 3% on FB and by Q4 they were pointing to their GEM & Lattice models driving "measurable increases in conversion rates and ad quality". They're literally telling us in black & white that AI is helping them make more money than ever! Revenue goes from $47.5bn (Q2) to $59.9bn (Q4).
I acknowledge CAPEX is massive but look at the effect, AI is empowering monetisation more than ever, and in my view represents the gold standard for showing AI adoption can lead to higher revenues. Higher revenues leading to higher capex leading to higher revenues, what if spending more is the bull case here? And the cost of getting it wrong is just a few quarters of revenue.
The other one I keep thinking about is what if long duration is actually investible? An Aussie 30yr bond around that 5.5-6% mark looks superb (ignoring inflation, I know I know). It would cover a retiree's minimum pension drawdown rates through to 75-79yo with complete capital stability. The 30yr hasn't gotten there yet (to 6%) but makes me wonder.
And going back to the headline, "Sell in May and Go Away" is a neat US-centric rhyme, but we have our own calendar with a neat little tax-loss selling period in June, and this year it has the makings of something more interesting than usual. We might end up getting selling pressure more mechanical rather than fundamental on the back of portfolio rebalancing and tax-loss selling across both funds and SMSFs. So what if a nice little flush comes along in June? Get your shopping lists ready!
Invert
I'm not pitching any of these as certainties, these are just other side of trades everyone owns. What happens if the market stops treating capex as a sin? What if long bonds crack 6%? What if the June flush shows up? Invert your thinking and ask what if you're wrong?