News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Heads Up:🇨🇳 Industrial Profits (YTD) YoY (AUG) due at 01:30 GMT (15min) Previous: 57.3% https://www.dailyfx.com/economic-calendar#2021-09-27
  • RT @FxWestwater: Australian Dollar Forecast: $AUDUSD Action May Swing on Chinese Industrial Profits Link: https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/asia_am_briefing/2021/09/26/Australian-Dollar-Forecast-AUDUSD-Action-May-Swing-on-Chinese-Industrial-Profits.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https://…
  • Central banks often deem it necessary to intervene in the foreign exchange market to protect the value of their national currency. Learn how central bank intervention can impact your trading here: https://t.co/8G8mUX4so6 https://t.co/YTdM3KVtUk
  • The Consumer Price Index, better known by the acronym CPI, is an important economic indicator released on a regular basis by major economies to give a timely glimpse into current growth and inflation levels. Learn how to better understand CPI here: https://t.co/nAa0fHHGbZ https://t.co/Bnih4YvTdg
  • *Reminder: Weekly Strategy Webinar tomorrow morning at 8:30am ET on DailyFX! https://t.co/lxd5fZ5LG7
  • (Weekly Fundy) Crude Oil May Rise as Covid Case Growth Slows. WTI Eyes OPEC Outlook, Evergrande #CrudeOil #WTI #OPEC #Evergrande https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/09/26/Crude-Oil-May-Rise-as-Covid-Case-Growth-Slows-WTI-Eyes-OPEC-Outlook-Evergrande.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/76e2aGf3p0
  • Recessions can devastate the economy and disrupt the fortunes of individuals, businesses, and investors. But economic decline in the business cycle is inevitable, and your trading can be defined by how you respond to crisis. learn how to prepare here: https://t.co/e4Cnoc1dk0 https://t.co/NhsMS1EY4b
  • We are heading into the final trading days for the month of September and event risk thins out amid the $SPX's rebound. This is what history says for the 39th week of the year and here is my take on the variable factors: https://www.dailyfx.com/forex/video/daily_news_report/2021/09/25/SP-500-and-Dollar-Have-Different-Views-for-Last-Week-of-September.html https://t.co/4OBVmrvI7I
  • Further your forex knowledge and gain insights from our expert analysts on AUD with our free guide, available today: https://www.dailyfx.com/free-trading-guides?ref-author=social#forecastschoices=AUD?QPID=30472&CHID=9 https://t.co/LHJi7CNFmM
  • $EURUSD https://t.co/KZyXX6p2oI
Stock Market Forecast: Should I Sell in May and Go Away?

Stock Market Forecast: Should I Sell in May and Go Away?

Rich Dvorak, Analyst

STOCK MARKET FORECAST: SELL IN MAY AND GO AWAY ANOMALY AT CONFLUENCE WITH CORONAVIRUS RECESSION, US-CHINA TRADE WAR TENSION & FED BALANCE SHEET GROWTH

  • ‘Sell in May and go away’ anomaly highlights abnormally poor stock market performance during May and summer months
  • Dow Jones price outlook appears threatened by underrated coronavirus recession risk and rekindled US-China trade war tension
  • Fed balance sheet growth and other accommodative measures combined with fiscal stimulus efforts could counter stock market selling pressure

The Dow Jones recorded an astonishing 34% climb from its March 23 low to April 30 close. When investors flipped their calendars to the new month, however, the Dow Jones and other US equity benchmarks, like the S&P 500 and Nasdaq, started to come under pressure. This brings the sell in May and go away anomaly into focus – a narrative explaining abnormally poor stock market performance throughout May and summer months.

Sell in May and go away might look like a statistical phenomenon on the surface, and contradiction of the efficient market hypothesis, but taking a deeper dive into macroeconomic history, and drawing upon context of major financial crises, reveals fundamental catalysts often explain why the Dow Jones and broader stock market have experienced lackluster returns during May and summer months.

DJI PRICE CHART – DOW JONES INDUSTRIAL AVERAGE SEASONAL RETURNS: SELL IN MAY AND GO AWAY

Stock Market Forecast Sell in May and Go Away Seasonal Dow Jones Index Price Performance

For example, just looking at the past decade, Greece was on the verge of defaulting on its debt in May 2010. Summer of 2011 saw the ECB stave off the Eurozone credit blowup by implementing its bond-buying program to save Italy and Spain.

China slashed its GDP growth estimates mid-2015 as it announced plans to restructure its economy for more sustainable growth. Similarly, the January effect, another seasonal stock market anomaly, can be explained by fundamental drivers as well.

DOW JONES PRICE OUTLOOK THREATENED BY CORONAVIRUS RECESSION, US-CHINA TRADE WAR

DJI Price Chart Dow Jones Stock Market Forecast Coronavirus Recession Trade War

Chart created by @RichDvorakFX with TradingView

On that note, and in consideration of current market conditions, such as the likely unavoidable coronavirus recession, or reintroduced trade war uncertainty, the risk of another sharp stock market selloff looms large. Upcoming nonfarm payrolls data – due Friday, May 08 at 12:30 GMT – might motivate investors to unwind the recent stock market rally driven largely by FOMC liquidity.

This is seeing that a double-digit unemployment rate could provide a harsh reminder of economic reality, fuel the return of risk aversion, and send the Dow Jones Index spiraling back lower. At the same time, as Trump talks tariffs, global equities face fresh headwinds from rekindled US-China trade war tension.

Also, while investor complacency builds, the stock market seems increasingly detached from fundamentals currently pricing stocks at record-high valuations on a 12-month forward P/E basis. Dow Jones price outlook correspondingly remains bearish. In turn, it seems quite possible that the sell in May and go away stock market anomaly could come to fruition once again this year.

Keep Reading – S&P 500 Jumps, VIX Sinks Amid Volatility Squeeze; Will it Last?

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES