Consider the opposite approach: Purchase in May and stay put.
Here's a paraphrased version of the given text:
Initially published in CNN Business' Before the Bell newsletter; subscribe here.
The well-known Wall Street saying, known as 'The Stock Trader's Almanac', advises investors to sell their investment assets in stocks during this month and buy them back in November because historically, stocks have underperformed during May to October compared to November to April.
After the difficult April that saw all major indexes ending their five-month winning streaks due to unexpectedly high inflation data, raising concerns about postponed rate cuts, some investors might be tempted to get rid of their holdings. The Dow Jones Industrial Average dropped by 5%, making it the worst month since 2022; the S&P 500 and Nasdaq Composite fell 4.2% and 4.4% respectively.
The unpromising start of May has failed to bring any relief, with stocks trading down on Wednesday, dropping most of the initial gains. The S&P 500 had slightly rallied after central bank head Jerome Powell commented on the likelihood of not increasing rates any further. However, the Federal Reserve maintained interest rates at their highest level in 23 years.
Although investing veteran Alex McGrath has a differing opinion and warns against sudden portfolio exits, stating that this action is not a guarantee of financial success, many are fearful of the persistent inflation, which prevents plans for early rate cuts. According to the CME FedWatch Tool, traders expect only one or two interest rate decreases later in 2024 instead of the previously predicted six.
The economy has continued to thrive despite one weaker GDP reading, with consumers continuing to spend at a substantial rate. The labor market remains strong and companies report impressive earnings growth. However, questions remain about whether the Fed's postponement of interest rate cuts will negatively impact the stock market.
Despite apprehensions, stocks have typically outperformed during summer months in presidential election years. In fact, the S&P 500 has seen a 2.3% average yearly rise in the May to October period since 1950 and has risen 77.8% of the time.
Specifically, the S&P 500's consumer staples and healthcare sectors have experienced average advances of 4.1% over the May to October timeframe since 1990, surpassing the broader market's 2.1% growth.
The Fed is maintaining current interest rates
The Federal Reserve declared Wednesday that they are leaving interest rates unchanged. Fed Chair Jerome Powell mentioned that they require greater certainty that inflation is under control before reducing borrowing costs, reports my team member Bryan Mena.
Since last year, the Fed has maintained its benchmark lending rate at its peak of 23 years, with several rises starting two years ago.
Their latest policy statement expressed that "there has been a lack of further progress" in their efforts to achieve increased price stability.
Additionally, the Fed will slow down its overall tightening of the economy by allowing $25 billion in Treasuries from its portfolio to mature without replacing them, compared to the current rate of $60 billion a month.
Read more: Fed decides to slow the pace of balance sheet runoffs starting in June_.
Tesla cancels electric vehicle charging team
In unexpected news, Tesla has let go of its electric vehicle charging team, resulting in uncertainty about the future of one of the top US electric vehicle charging networks that other companies, including General Motors, have said they will use.
Several former team members confirmed the layoffs on social media, as first reported by The Information.
William Navarro Jameson wrote on X, "Tesla has let our entire charging org go."
In a LinkedIn post, Lane Chaplin, senior manager in Tesla's charging division, stated: "In the middle of the night, I learned, along with all my #Tesla Global #Charging colleagues, the Tesla Charging org is no more."
With the lack of charging infrastructure being a primary challenge to widespread electric vehicle (EV) adoption, Tesla's well-established "Supercharger" network has always been an urgent selling point for its vehicles.
Interestingly, this network was previously exclusive to Tesla vehicles.
Read also:
- Lack of snow also opens up new opportunities for winter tourism
- Abrupt end to e-car subsidies
- The chemical industry has little confidence
- Intersport boss hopes for sales boom through sporting events
Given the current market volatility and the historical performance of stocks during May to October, some investors might consider this period as an opportunity for business expansion. They could allocate funds for investing in sectors that traditionally perform well during these months, such as consumer staples and healthcare.
Furthermore, with the Federal Reserve maintaining current interest rates, some investors might see this as an opportunity to enter the equity market. Lower interest rates often make borrowing cheaper, which can incentivize businesses to invest in growth opportunities, potentially leading to increased company earnings and stock prices.
Source: edition.cnn.com
