One of the more interesting and entertaining aspects of investing is the myriad of adages which, as you would expect with adages, express a general truth about the markets. Consider, “Don’t Fight the Fed” – when the Fed wants to support or restrain risk assets, it typically prevails; or “It’s A Market of Stocks, Not A Stock Market” – individual stocks often have shockingly different return streams, offering investors the opportunity to put capital into companies that are doing well and avoid companies that are struggling. And, of course, “Sell in May and Go Away” – which speaks to the seasonally weak stretch for equities that has historically started with May and ended with October. While May has come and gone, we’ve been thinking about that adage – and we would argue the bum rap that May gets because of it – as we move deeper into what has been the worst two month stretch for US equities: August and September. Consider that since 1950, the S&P 500 has been, on average, flat in August and off 0.5% in September (the only negative month for the index over that 70-year timeframe), while May and June and July have been positive. Regardless of the time of year, the market typically confronts any number of risks, and today is no different as we are dealing with the Delta variant of COVID-19, the spike in inflation, and the regulatory crackdown in China. For those reasons and others, we wouldn’t be surprised to see a bit of volatility over the coming weeks. But earnings are growing, interest rates are low, fiscal and monetary policy are supportive (see above: ”Don’t Fight the Fed”), and consumers and companies are flush with cash. For those reasons and others, we remain bullish on US equities.
Tagged: Tim Holland, weekly wire, market perspectives, US equities, S&P 500