The adage goes, ‘Sell in May and go away.’ Quite frequently we see the year start with lots of energy just to have that momentum derailed in May.  Whether it be the result of geopolitical concerns, weak first quarter economic results, natural disasters, etc.  This year these things were averted (so far), why?

The harsh winter took much of the blame for the lack luster economic results throughout the first quarter, not without cause.  Many of the economic reports for April showed a bounce back effect, illustrating the impact of cabin fever.

Reduced interest rates due to the slow economic activity have led to falling mortgage rates, which have helped bring a soft residential real estate market to a simmer.  This area of the economy has been a laggard in its contribution to GDP; improved home sales as of late have helped improve the economic outlook.

The S&P 500 return from 4/30/14 through 5/23/14 was 1.18%[1].  While not the most explosive month, there is no negative sign in front of that number which has been rare in recent years for the month of May.  98% of S&P 500 companies have reported earnings, with 75% beating earnings expectations.  While this is upbeat data, just 53% of companies are beating revenue estimates[2].  This presents a concern for long term earnings capabilities.

New job creation through April equaled 857,000[3]. While not overly impressive this job creation still leads to consumer spending in coming months and should be viewed as a positive.  The increase will become more substantial since January and February job creation numbers were light due to harsh winter weather (again with the weather).

Internationally, Russia completed a natural gas export agreement with China that will last the next 30 years and replace some of the losses incurred by the sanctions placed on them from the US and EU.  Manufacturing PMI for the EU has softened while Chinese manufacturing PMI strengthened.  Great Britain GDP for the 1^st Quarter improved more than expected.

Those who know me, know I’m superstitious and may be wondering, ‘why is he calling a no hitter in the 8^th inning?’  Well:

• Light trading activity due to the holiday weekend is expected.
• Earning season is down to its final 11 companies of the S&P 500.
• Economic data, while important, is limited to the following this coming week:
  • Durable Goods
  • Consumer Confidence, Spending, and Sentiment
  • Q1 GDP revisions
  • Pending home sales

In closing, thank you to those who have served our nation and may this Memorial Day be happier for you than those past!

For more information:

If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services.  Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.  Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.