Walking Away In May Worked - June Depends On Developments

The old market adage, “Sell in May and go away” would have worked for you this year. The SPDR S&P 500 (SPY) declined by 6.3% through the month of May. So how does June shape up then? Whether the market recovers its losses or completely collapses will have a lot to do with trade policy developments. If the Administration continues to wage economic warfare on a worldwide scale, then I expect the decline seen in May to accelerate. However, if recent rhetoric regarding tariffs on Mexico and China prove to be just words, and developments swiftly trend toward amicable resolution, then stocks should recover quickly. Given the uncertainty, heightened volatility is our only guarantee, and so perhaps your best bet is no bet for now, or on volatility. Long-term investors can wait out fluctuations caused by tumultuous tongues and maintain their holdings in a diversified manner. However, make no mistake that the most recent trend toward asymmetric trade warfare bears a cost, and could be the cause of a premature end to the economic expansion.

The one-month chart of these major market index ETFs shows equity losses in May were widespread. Everything was down by nearly the same degree, though at the fringe of risk in the technology and small cap ETFs, the losses were greater. As stocks decreased on global trade concerns, we see that volatility intensified; the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) was up 18.5% in May.

Original source

Add comment

Please Sign in to be able to leave comments.