Legendary investor Warren Buffett told his faithful over the weekend that the U.S. economy is “red hot,” suggesting money in an index fund is better served than picking stocks. That advice comes as investors face what could be a seasonally weak period for equities.
The “sell in May and go away” adage dictates that from now to October is often a less profitable and more bumpy time for stocks, partly as the weather warms up and big traders spend more time vacationing, leaving behind junior traders and opening the door to volatility.
A stock hiatus doesn’t seem like a crazy idea right now. Hovering near all-time highs, the S&P 500SPXhas gained for three straight months and the economy is indeed rebounding hard from the pandemic. And pent-up demand for a summer vacation and plenty of vaccines in the U.S., at least, justifies going away for a little while.
But instead of selling, “curb your enthusiasm” may be better advice to follow for the next six months, says ourcall of the dayfrom Stifel’s head of institutional equity strategy, Barry Bannister. He predicts the S&P 500 is headed for flat to down 5% to 10% for the next few months.
He bases that on the “usual seasonality math” that predicted a 26% gain from November to April 30, 2021, while we got a 28% bump. Others have been chiming in on seasonality, such as UBS and LPL Financial who bothurge investors to stick around. Here’s Bannister’s chart:
His next chart shows this: “A lump-sum of $10,000 (no further contributions) invested in 1950 in the S&P 500 has produced a cumulative return in the 6
months Nov-1 to the following year’s Apr-30 that is 38 times larger than if invested only in the preceding 6 months May 1 to Oct-31.”
“If May through Oct-2021 is seasonally weak, we note that S&P 500 defensives (staples, healthcare, utilities, telecom services) do typically outperform cyclicals (note cyclicals include technology) in the same period, albeit usually with falling yields. S&P 500 seasonal strength the six months since Nov-1, 2020 also appears to have front-loaded returns, diminishing May-Oct 2021,” he said.
Taking your eyes off the screens this summer may be less advisable if you’re hot on cryptocurrencies. EthereumETHUSDhas topped $3,000for the first time, with gains outpacing those of bitcoinBTCUSDso far this year. Berkshire Hathaway’s vice chairman Charlie Munger hadnothing good to sayabout cryptos at the shareholder meeting on Saturday.
President Joe Biden’s massive proposed spending plan won’t spark inflation, argued Treasury Secretary Janet Yellenon NBC’s “Meet the Press”on Sunday. Federal Reserve Chairman Jerome Powell will be speaking at the Just Economy conference on Monday, discussing community development.
The Markit final April manufacturing purchasing managers index is on tap, with the Institute for Supply Management’s April manufacturing index and construction spending also ahead, along with auto sales.
Another busy week for earnings kicks off with do-it-yourself home retailer Lowe’sLOW,makeup giant Estee LauderELand chip supply group ON SemiconductorONexpected to report before the bell on Monday.
Shares of TeslaTSLAare pitching south after a German trade magazine said production at the electric car maker’s new gigafactory outside Berlinis facing another six-month delay.
Multinational conglomerate Berkshire HathawayBRKMX:BRKBsaid itswung to a first-quarter profiton stock gains and better results from its insurance business.Among the highlightsfrom Saturday’s shareholder meeting, Chairman and Chief Executive Officer Warren Buffettdefended selling airlines, discussed a“casino”-likestock market, andwarned overspecial-purpose acquisition companies
Telecoms giant VerizonVZis nearing a deal to sell its Yahoo and AOL internet units to private equity group Apollo Global ManagementAPO,the New York Timesand other media outlets reported, citing sources.
Epic Games and AppleAAPLwillsquare off in court on Monday. The maker of the popular Fortnite online game has accused the iPhone maker of abusing its App Store for anticompetitive purposes.
The EU is urging the lifting of restrictions on non-essential travel to the region by vaccinated foreign nationals who hail from a country that has a good epidemiological situation.