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Buy in May and Go Away

This column originally appeared on Real Money Pro at 8:55 a.m. EDT on May 8.

NEW YORK ( Real Money ) -- With the S&P 500 trading (adjusted for the drop in stock futures this morning) at a near-9% discount to my fair market value calculation of 1485, investors should buy in May and go away.

I am under no illusion that the U.S. stock market is poised for a move straight up to the Promised Land -- rather I expect an irregular grind to higher levels. Given the technical damage and the ambiguous domestic economic releases, we likely need confirmation of my view of a self-sustaining recovery in additional data points.

On Monday, stocks rebounded from a Sunday night 1.5% drop in S&P futures after the results of the Greece and France elections left a sour taste in the mouths of traders. Throughout the day, the markets steadily regained their moorings, and by the close of trading, the S&P 500 closed higher than Friday's close and halted a three-day slump (which culminated in a 2.4% tumble last week).

Remember, at times, it is more significant how the market reacts to news than the news itself.

While one day does not a market make, yesterday may have been an important trading day, a day that may have set the foundation for the next leg higher into the summer months.

To be honest, I have no idea as to the short-term direction of the U.S. stock market. I have always viewed daily, weekly and even a month's market predictions as being no better than a coin toss. (Warren Buffett put it more visually when he once wrote that market prognosticators are like fortune tellers who should be locked up in a closet and kept away from children and portfolio managers who act like children.) But I do feel strongly, that those with an intermediate term prospective (of three to nine months) will be rewarded -- perhaps richly.

There are numerous reasons for my intermediate-term optimism and my belief that, if things work out as I expect, new highs in the S&P 500 remain a possibility.

Above all, investors' fear of a spring-summer stock market schmeissing caused by the potential of slowing economic growth (reflected in the recent share price weakness and manifested in a 10-year U.S. note yield of 1.85%) seems misplaced, as there are more noticeable dissimilarities than similarities between today and a year ago (when stocks began to slip into a meaningful correction mode). Nor does domestic economic high-frequency data dent the notion of a self-sustaining recovery.

I am not alone in my economic optimism. Late last week, Philly Fed President Charles Plosser (who doesn't vote on the FOMC) forecast 3% real GDP growth this year and next, with unemployment falling to 7% by year-end 2013.