To The Moon

"Sell in May and go away" is an investment adage warning investors to divest their stock holdings in May and wait to reinvest in November. From 1950 to around 2013, the Dow Jones Industrial Average posted lower returns during the May to October period, compared with the November to April period.

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However, this year seems to be different. Since the beginning of the year, the stock market has been in a correction most of the time. The $S&P 500(.SPX)$ is down 10% as of the close yesterday. With the news that interest rates will indeed increase by 0.5% yesterday, the major indexes closed green, with the $DJIA(.DJI)$ gaining 2.81%, the S&P 500 moving up 2.99%, and the tech-heavy $NASDAQ(.IXIC)$ recovering 3.19%.

What may be the main factors affecting the stock market? 

Inflation Has Peaked? 

Stripping out food and energy costs, the PCE inflation measure rose 5.2%, a slightly slower pace than the 5.3% recorded in February. Some economists(eg. Julian Emanuel, Evercore ISI sr. managing director) believe that inflation has peaked, and the stock market will perform more strongly after inflation eases. 

Europe's ban of Russian oil 

Crude prices jumped on Wednesday after the European Union proposed a ban on oil imports from Russia as part of a new round of sanctions. Brent crude, the global benchmark for oil, jumped more than 4% on the news and was trading at around $110 a barrel. 

The Fed’s May FOMC 

The Fed’s May FOMC meeting concluded yesterday with the news that interest rates will indeed increase by 0.5% and that the Fed will begin reducing its $9 trillion balance sheet in June, which is almost what the market estimated. 

Views on the market

"I think it’s possible we get a relief rally led by tech""Faster growing stocks are trading at a discount to slower growers = panic out of stocks broadly = bizarre inversion", says Tom Lee, Fundstrat Global Advisors managing partner and head of research. 

"It gets to the question: At what point does the consumer blink in the face of these rising prices""On the low-end consumer, they’re already beginning to blink”, warns Peter Boockvar, the Bleakley Advisory Group CIO  

What's your stance? Will you "sell in May & go away"? How will the market perform in May?  

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