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I don’t think the best search engine optimization practice is to recommend the real title I wanted to use: “Shit Happens…Often.” But including it in the body is probably good enough, eh?

Man, I suspect we will be seeing a lot of “Sell in May” references by the time this month is over.  Heading into today, the S&P 500 is already down over 4% for May and we still have three trading days to go. Considering today’s weak market, I’m betting we could see a 5% decline for the month.

In contrast to the equity market, Treasuries have been doing well.  The Bank of America / Merrill Lynch index of long-term notes, which basically looks at Treasuries that are 10-year and longer in maturity, U.S. Treasuries are up over 4% for May.  A 4% monthly decline for equities isn’t that rare…According to Bespoke, there have been 40 prior occurrences since 1990.  However, when it’s accompanied by a rally in U.S. Treasuries of this degree, it’s a lot less common.  They also note that “since 1990, there have only been ten other months where the S&P 500 was down more than 4% heading into the final three trading days of the month while at the same time long-term U.S. Treasuries were up over 4%.”

They go on to say that there is usually a rally when that happens, but I don’t think anyone should be pegging any hope on that.

The real issue is the economy.  People sell stocks and buy bonds when they speculate that the economy will do poorly.  I believe the basis for this slowing economy sentiment is grounded in the China trade issue.

Okay look, I get it. China news gets everyone speculating that there could be a slowdown, and frankly it could be true.  But I don’t think it’s a tradable event.  What’s different today than a month ago? Rhetoric out of both governments?  That’s saber rattling until it’s not.

For now, I still see MONCON 5.  I see nothing in the model suggesting that we are in a recession nor do I see data that suggest we are within six months of a recession.  It’s true that headwinds have picked up, but a slowing economy is no where near the same thing as a negative economy (recession).


Actually, the most interesting data I see that feeds into MONCON is the massive uptick in Google search volume for the word “recession.” Since that’s the only thing that’s up-ticking, I think it’s indicative of some emotional response to the news cycle.

Sit tight right now – don’t react to this month’s poor equity market performance.  Remember to anticipate your cash needs and as always…

Keep looking forward.


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