Sell in May – stay away, how did the month of May shape up?

Stock markets up

We all know the old adage, ‘sell in May and stay away‘, and there is some truth to it – but not for this May it would appear. Many indices saw good gains. So where now in June?

Stocks closed out the month with good gains across the board, building on very healthy gains in April. The Dow and S&P 500 both rose more than 4% while the Nasdaq was up nearly 7%., with the Dax up just under 7% for the month.

Indices gain in May

The Dow opened May at: 24346 and closed at: 25383 an increase of 1037 points. The S&P 500 closed April at: 2912 and finished May at: 3044, a gain of 132 points. The Nasdaq gained 601 points closing May at: 9490. The FTSE 100 closed April at: 5901 and finished May at: 6076 a gain of 175 points. The Dax gained 726 points.

The largest gains came at the end of March and through of all of April after the historic lows of March 23rd. And all these gains were achieved with the backdrop of economic uncertainty as nations battled against Covid-19. Never seen before levels of central bank stimulus certainly provided a backstop of confidence – but for how long?

Will June continue the gains

Vaccines and better treatments will arrive in the future and our understanding of the virus and the economic damage will slowly unravel as we lurch forward again in small steps making best guesses to circumnavigate the damage caused by the ‘unseen’ enemy. But the serious economic problems are not far away, debt being the biggest one, in my opinion.

Struggle

The debt accumulation the world has now undertaken will likely ravage generations to come. It has been reported that the UK may end up with a debt of £2 trillion and the U.S. balance sheet is reported to have already exceeded $7 trillion. The financial crisis of 2008 didn’t see these levels of unprecedented borrowing, the debt then didn’t breach $2 trillion.

Borrowing

On top of this too, many countries continue to struggle with the economic after-effects of lockdown. The fear of a second virus wave is very real. Have we really dealt with the first yet?

The U.S. now has it’s own unique set of problems. The country has to deal with some 40 million unemployed, a backlash of extreme violence now seen across many U.S. cities because of the recent resurgence of racial tensions, the result of a dreadful and shameful brutal act.

And then there is the ongoing hardship and difficulties associated with re-opening the U.S. economy severely ravaged by the coronavirus. I have no real clue though how this will shape up.

Unfair

But I do know that the unfairness of how the virus has hit ethnic minorities hardest is devastating and grossly unfair. Why is this? And now we have escalating tensions brewing again between China and the U.S. President Donald Trump has also dumped support for the WHO.

The virus, broken economies, civil unrest and trade tensions are not a good mix. The U.S. has always led the free world and must somehow demonstrate that leadership again. It won’t be easy.

Scheduled market events to keep an eye on

Monday 1st June 2020

China – manufacturing PMI data due overnight

UK – manufacturing PMI data due at: 09:30 BST

U.S. – manufacturing data due at: 14:45 – 15:00 BST

Tuesday 2nd June 2020

Australia – interest rate decision

Wednesday 3rd June 2020

Australia – GDP data due

Germany – unemployment data due

EU – unemployment data due

U.S. – ADP employment data due, PMI non-employment data due, non-manufacturing PMI data due

Canada – interest rate decision and statement due

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