Investor - an insider's guide to the market: 'Sell in May and go away" is an old stock market adage that unfortunately cannot be relied upon as a sure-fire investment strategy.

For a start, it is too vague to be of practical use and the historical evidence does not provide sufficient statistical support. Therefore, professional and private investors must continue to assess financial trends and manage their portfolios in the normal way over the summer months.

Regarding economic trends, the monthly US employment report has become one of the most closely watched of the regular economic data releases. Earlier in the year this important indicator showed job growth in the US economy was very sluggish.

In the absence of a significant acceleration in jobs growth, it was felt that the US economic recovery would run out of steam during 2004.

The employment report for March marked a turning point in the US labour market for this economic cycle. Monthly gains in employment had been running at 125,000 but in March the US economy created 308,000 jobs.

The April release was also very strong and the recently released May report shows strong employment gains are continuing.

Non-farm payrolls in May climbed by a stronger-than-expected 248,000 and there were also revisions to the March and April data which showed 74,000 more jobs were created in March and April than previously thought. Total job creation in the US over the past three months totals 947,000 or an average monthly gain of 316,000.

This matches the average monthly gain that was achieved during the 1996-2000 boom years.

It is now widely accepted that the US economy is enjoying a strong cyclical upswing that should continue well into 2005.

It is unlikely to be derailed by high oil prices unless the price of crude oil spikes to extremely high levels. The US and wider global economy should be able to cope comfortably with a $40 (€32.60) per barrel oil price.

While unforeseen geopolitical events could deliver a shock, OPEC's recent announcement of its plans to increase supply seems to have calmed the markets.

Furthermore, indications that oil and gasoline inventories have been rebuilt in the US give some hope that the oil price may even decline over the rest of the year.

At this stage financial markets have probably fully priced in the negative impact on economic growth of oil prices in the $35-40 per barrel range. The risks of a sustainable surge in the oil price above $40 now seem to be receding.

With oil supply and demand now in better balance, investors may even get to enjoy a bonus due to a pullback in the oil price over the summer months.

If the oil market does indeed stabilise over the summer it will allow investors to focus on the positive effects of a sustained US and global cyclical economic recovery. Corporate profits have been expanding rapidly, which has spurred many corporations to bring forward capital investment programmes.

This virtuous cycle of increased levels of activity leading to growing profits and more investment should last well into 2005. This is clearly a positive environment for equity markets and on its own should lead to higher global share prices.

But investors also will have to take into account the impact that strong rates of growth will have on interest rates.

The first of the long-awaited series of rises in US interest rates is almost certain to occur over the summer months now that employment is growing so rapidly in the US. The US Fed is due to meet at the end of June and is widely expected to raise rates by 25 basis points at that meeting.

That would still leave US official short-term interest rates at only 1.25 per cent so that subsequent rises would be inevitable. Financial markets are pricing in a rise of one percentage point in the Fed Funds rate to 2 per cent by year end. If the US economy maintains its upward trajectory into 2005 then the cycle of rising interest rates would continue into 2005.

Rising short-term interest rates usually lead to increases in the yields of medium and long-dated fixed interest (or bond) securities. As the yield on such securities rises, their market price falls.

Ultimately, the prices of such bonds may fall to a level where investors consider they are a better long-term investment than equities.

Currently the yield on US 10-year government bonds is 4.74 per cent, which is not particularly attractive.

If the yield were to rise as high as (say) 6 per cent, however, many investors might decide to sell equities and invest in bonds.

Therefore, rising interest rates and bond yields will usually exert downward pressure on share prices.

Over the summer months, the triumvirate of real economic trends, oil prices and interest rates will demand the close attention of investors. Trends in real economic activity should continue to be supportive and the negative impact on markets of higher oil prices may already have run its course.

Trends in interest rates are the key threat to share prices and therefore the initial reaction of US and global stock markets to the first rise in US rates will be dissected carefully by financial analysts and investors alike.