“Will stocks disappear in May?” Some market participants believe that it is better to wait and see this year. The old stock market adage speaks to a phenomenon that is borne out by the fact that the period from May to October is seasonally the worst six-month return for the stock market. As traders take time off from their desks during the summer, lower liquidity and higher volatility contribute to the increased likelihood of drawdowns. But that adage may not apply this year. Will this be the year that they leave without selling in May? said Jeffrey Hirsch, editor-in-chief of Stock Traders Almanac. “Let’s track and see what happens to the market.” There is reason to believe the next move will be higher. The S&P 500 and Nasdaq Composite are at record highs even as the turmoil continues in the Middle East, demonstrating the continued resilience of the stock market, especially as the range has widened behind the scenes. .SPX .IXIC YTD Mountain SPX vs. Nasdaq Year to Date Technical settings also remain positive. One of Hirsch’s favorite metrics is called Moving Average Convergence Divergence (MACD), which shows the relationship between 12-period and 26-period exponential moving averages. This indicates specific entry and exit points for the market and suggests that there is still momentum in the current bull market. But there are also warning signs to watch out for, especially when it comes to the economic outlook. The latest GDP forecast released by the Atlanta Fed puts U.S. GDP growth at 1.2% in the first quarter, down from previous forecasts of more than 3%. Concerns also remain that the disruption of AI in the labor market is not yet fully understood. Ultimately, a key factor in determining where the market goes next will depend on the outcome of the war between the US and Iran. Reopening the Strait of Hormuz and a more durable peace deal could provide confidence to investors wary of an economic slowdown due to rising prices. A CNBC survey found that U.S. consumers are already cutting back on spending as gas prices soar above $4 a gallon. “A more durable solution to the situation in Iran would be [the] “The market will probably go up from May to October,” Hirsch said. “If things drag on and the MACD signal crosses into the negative, you might want to take a few chips off the table and tighten up a little bit.” Granted, the historical pattern for the six months from May to October was bad, but especially so in a midterm election year. Data dating back to 1945 shows the S&P 500 is up just 2% since May. As CFRA’s Sam Stovall noted, the overall index fell an average of 1.2% from May to October during the midterm election period, but Paul Sciana, chief market technician at Bank of America Securities, said the June review will continue to debunk the “sell-in-may” theory this year. Three-month and one-month average trends suggest traders should buy in May and sell in July or August before anticipating an August-October downturn, but in the meantime, Hirsch said he likes the iShares 0-3 Month Treasury ETF (SGOV) and the iShares Trust iShares 0-1 Year Treasury ETF (SHV). iShares Core US Aggregate Bond ET (AGG) is also one of his favorite sectors, he said, “not necessarily going away, but we need to reposition it.”
