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After an April Slump, What Does This Mean for Stocks Overall?

HWM Market Recap - May 2024

Holzberg Wealth Management Newsletter
Executive Market Summary

There is a long-standing adage in investing: 'Sell in May and Go Away.' It traces its origins back to London's Financial District. Initially, the full phrase was 'Sell in May and go away, come back on St. Leger's Day.' St. Leger Stakes is one of the most well-known horse races in England. The phrase suggested that the wealthy British elites should sell their investments in May, relax by escaping the London heat, and flee to the countryside. Then, upon returning to London in the autumn after the St. Leger Stakes, reinvesting in the stock market.


Over time, the 'Sell in May and Go Away' adage has transcended its original context and found application in the U.S. stock market. This shift is attributed to the common practice of taking vacations between May and September. The adage now suggests that before embarking on their summer vacations, investors should reduce their market exposure by selling part or all of their stock positions. This trend leads to decreased market activity, creating a summer lull. Market conditions typically normalize once these investors return, marking the end of summer and the start of the fall season.


Presently, some investors adhere to the phrase as an investment philosophy. They choose to be invested only between the months of November and April, selling their positions in May before taking a vacation. However, most astute investors today view this adage as nothing more than a catch-all saying to express overall market sentiment heading into the summer rather than a concrete investment strategy.


In 2024, market performance in May and these next few months could be a barometer for how the market will perform for the rest of the year. In the first quarter of this year, everything looked great. There were seemingly universal expectations of an economic soft landing, the economy was strong, inflation was coming down, investors anticipated aggressive rate cuts to come, and the stock market had nice gains. However, those good feelings dissipated in April as stubborn inflation reared its ugly head, causing the S&P 500 to give back almost half of its first quarter's gains. If we see underperformance in the summertime, we will likely see political moves occur heading into the fall to help stimulate growth heading into the election in November.  However, given that the summer historically can be a lackluster time in the markets, growth during this time is good news for underlying economic strength.


Since making its final rate hike in July of last year, the Federal Reserve's plan to leave rates higher for longer has yet to bring down stubborn inflation all the way down to the 2% target. Not only that, but inflation numbers have actually ticked up again these last few months, demonstrating that the path toward rate cuts is more elusive than investors would like. This has given Wall Street pause about whether the Goldilocks soft landing scenario is as guaranteed as it thought leading up until now. Consequently, this has caused investors' expectations for rate cuts to go from six at the beginning of the year to now two, with some investors questioning whether the Fed will cut rates at all this year.


That said, it is not just data that drives markets but also mood and momentum. As we stated in our previous newsletter:


"Generally, the economy follows in the footsteps of consumer outlooks. As long as consumers are optimistic, the economy should move in a positive direction."

To compare consumers' feelings about the current economic environment with their expectations for its future performance, we can look at the Conference Board's Present Situation Index and the Expectations Index. These indices assess consumers' feelings about current business and labor market conditions and their short-term outlook for those conditions, respectively. Both have bounced around a bit for the last year and a half but are more or less flat since the beginning of 2023. This tells us that investors are wrestling with many questions.  


Since the start of the year, inflation has remained high, interest rates have remained steady, and stocks are up despite the April pullback. All of this, coupled with stock market overvaluation, a fragile real estate market, and continued geopolitical risks, contributes to overall confusion.  Our view is that it will all depend on whether inflation can improve in the next couple of months and for the rest of the year.  If it does, we could see a lot of these clouds lift, and the markets do quite well.  One way or another, we will likely see stock market volatility as investors digest the idea of fewer (or possibly no) imminent interest rate cuts.


Markets Overview

​Monthly Changes in Indices

  • S&P 500: -3.97%

  • DJIA: -4.43%

  • Nasdaq Composite: -4.51%

​Year-to-Date Changes in Indices

  • S&P 500: +6.17%

  • DJIA: +0.27%

  • Nasdaq Composite: +6.04%

​Monthly Performance By Sector

  1. Utilities +2.28%

  2. Consumer Staples -0.33%

  3. Energy -1.67%

  4. Industrials -2.78%

  5. Financials -3.65%

  6. Consumer Discretionary -3.78%

  7. Health Care -4.19%

  8. Materials -4.36%

  9. Communication Services -5.38%

  10. Technology -6.02%

  11. Real Estate -6.82%

​Year-to-Date Sector Performance

  1. Energy +10.36%

  2. Communication Services +7.76%

  3. Industrials +7.69%

  4. Financials +6.89%

  5. Technology +4.71%

  6. Utilities +3.88%

  7. Materials +3.79%

  8. Consumer Staples +3.65%

  9. Health Care +1.12%

  10. Consumer Discretionary -0.86%

  11. Real Estate -10.49%

​News Influencing the Economy
  • The Federal Reserve announced in its May meeting that it will hold rates steady – the sixth meeting in a row it has done so.

  • According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.4% in March compared to February. Over the last twelve months, the index rose 3.5%.  The Core CPI, which excludes volatile food and fuel prices, also rose 0.4% month-over-month and increased by 3.8% annually. Meanwhile, the Personal Consumption Expenditures (PCE) index increased by 0.8% in March since February and is up 2.7% annually. The Core PCE, which excludes food and energy prices and is the Fed’s preferred measure of inflation, increased by 2.8% from a year ago.

  • In 2022, Congress passed the CHIPS and Science Act, which provided federal funding to semiconductor companies to boost manufacturing in the U.S. Two years later, the government spent more than half of the CHIPS Act’s $39 billion in incentives. Chip companies and their suppliers have announced investments of $327 billion over the next ten years. Moreover, construction of manufacturing facilities for computing and electronic devices has jumped 15 times. Commerce Secretary Gina Raimondo states that by 2030, the U.S. will likely produce around 20% of the world’s most advanced chips, up from the 0% it makes today.

  • Per the latest data from the Bureau of Economic Analysis, U.S. GDP grew at an annual rate of 1.6% in the first quarter of 2024. This is down from the 3.4% annualized increase in the fourth quarter of last year.

  • Mortgage rates for a 30-year fixed rose for the fifth straight week to 7.22%, the highest since November 2023. Existing home sales fell by 4.3% in March compared to February and decreased by 3.7% from the year prior. Meanwhile, the median existing-home sales price rose 4.8% in March to $393,500. Inventory of unsold existing homes also grew by 4.7% in March compared to February.

  • According to the latest Employment Situation Summary from the Bureau of Labor Statistics, the U.S. added 175,000 jobs in April. Also, the unemployment rate ticked up slightly to 3.9% from 3.8% in March.

  • The April Consumer Sentiment report from the University of Michigan showed that consumer sentiment continued to plateau and was virtually unchanged for the third consecutive month.   The report also showed that year-ahead inflation expectations and long-run inflation expectations both ticked up slightly. 

  • Retail sales increased more than economists originally forecasted for March, demonstrating that consumer spending remains strong despite inflation.

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About the Author

Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and virtually nationwide with the financial decision-making process to organize, grow, and protect your assets.


** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.


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