Recall the old adage: Sell in May and go away?
…Well that may be the correct thing to do this year.
The S&P 500 fell 6.6% May, after topping out at an all-time high on April 30.
It was up ~25% off the December 2018 lows, and 17% year to date at the high (Figure 1 below).
Why the change?
Recall in late 2018 the S&P 500 dropped precipitously as investors worried that the Fed was raising rates too late in the cycle.
Once the Fed capitulated, the S&P 500 vaulted off its December 2018 lows in the belief “the Fed has your back.”
However, during the early part of the year the worldwide economy was beginning to decelerate.
In particular, the US economy and corporate earnings were beginning to slow. This became apparent during May as several economic indicators and economists’ models began to show the deceleration.
As usual, the bond market was the first to sniff out the problem with a good portion of the yield curve inverting in March and again in May (the yield curve often inverts—shorter term bonds yielding higher than longer term bonds—prior to recessions).
In addition, investors began to fear that US tariffs would exacerbate the deceleration even more in the future, leading to further declines in equities.
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This market commentary was written and produced by Stableford Capital, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX: The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.