Will the market adage of “sell in May and go away” ring true as we enter this infamous month?

Perhaps it’s prudent to consider the average performance of the S&P 500 over the past 20 years. For the month of May, the S&P 500 averaged a gain of 0.38%. While it’s the lowest average monthly climb, it still beats the average losses seen in other months over the past two decades:

  • January: -0.05%
  • February: -0.58%
  • March: 0.46%
  • April: 2.53%
  • May: 0.38%
  • June: -0.62%
  • July: 1.19%
  • August: -0.15%
  • September: -0.77%
  • October: 1.07%
  • November: 2.19%
  • December: 0.72%

The historical averages suggests that who do sell out of US stocks in May could be leaving some profits on the table.

In fact, the month of May has seen the S&P 500 register a monthly advance in 7 out of the past 8 years.

Although the first full week of this new month is set to begin on a quiet note, with several major markets closed for a holiday on Monday, there are still several notable events in store that could shake global financial markets:

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Monday, May 3

  • China, Japan, UK markets closed
  • Manufacturing PMI for US, Eurozone, etc.
  • Fed Chair Jerome Powell speech

Tuesday, May 4

  • China, Japan markets closed
  • RBA policy decision
  • Fed speak: San Fran. Fed President Mary Daly, Minneapolis Fed President Neel Kashkari

Wednesday, May 5

  • China, Japan, South Korea markets closed
  • Fed speak: Chicago Fed President Charles Evans, Cleveland Fed President Loretta Mester
  • Uber Q1 earnings (after US markets close)

Thursday, May 6

  • BOE rate decision
  • ECB President Christine Lagarde speech
  • Fed speak: Dallas Fed President Robert Kaplan, Cleveland Fed President Loretta Mester
  • US weekly jobless claims

Friday, May 7

  • China exports
  • US April nonfarm payrolls

 

The Fed still holds arguably the biggest influence over how global equity markets would perform over the coming months.

Despite the repeated assurances by Fed officials that the US central bank will maintain its ultra-accommodative policy stance, yet the forward-looking nature of the markets demands that investors and traders try and pre-empt when US policymakers would pare back its bond purchases before eventually raising US interest rates.

Hence, the speeches by Fed officials slated for the coming days could harbour more clues about the US monetary policy outlook. Fresh from last week’s FOMC meeting, investors and news reports would be eager for fresh clues about what may have been discussed before deciding to leave US interest rates floored at near-zero levels.

Better jobs recovery could hasten Fed policy tweaks

Amid such a backdrop, this week’s data releases pertaining to the US jobs market would be in particular focus. Better-than-expected readings for Thursday’s US weekly jobless claims, and also for the April US nonfarm payrolls print, due Friday, could inject more optimism into stocks that are set to benefit more from the US economic recovery.

Gains in energy and financial stocks could help the S&P 500 create a bigger gap above the psychological 4,200 mark. However, should the market narrative center on fears that the Fed would be pushed closer to pulling back their support for financial markets due to the recovery in the US economy, that could see a notable pullback towards the 4,120 support level for this blue-chip index.

At the time of writing, the futures contracts for all 3 major US benchmark indices are climbing, suggesting a positive start to May for equities. Still, markets have little qualms paring some of their risk exposure upon news this week that the Covid-19 pandemic could delay the global economic recovery.

 

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.