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Stocks Benefit From Solid Fundamental Foundation
April showers brought May flowers as markets placed greater importance on economic growth and corporate profits than the “higher for longer” interest rate messages from the Federal Reserve (Fed). In fact, the S&P 500 ended May above where it ended March. So, as you prepare for summer vacations, how much should you worry about your stock portfolios?
First, based on history, stocks tend to do just fine between Memorial Day and Labor Day, with the S&P 500 rising 1.8% on average between holidays with gains 70% of the time (source: Bespoke). Also consider stocks tend to do better the rest of the year when they rise in May, with an average June–December gain of 5.4% with positive returns 73% of the time. Seasonality is not particularly worrisome.
Corporate America has done its part in keeping the stock market well-supported, even underneath elevated valuations. Earnings for S&P 500 companies in aggregate grew about 10% during the first quarter, excluding losses incurred by a Bristol Myers Squibb acquisition. Guidance was mostly upbeat. Some retailers, such as Walmart and Target, even announced price cuts, helping fight inflation.
We continue to follow global headlines. The possibility of China’s military aggression toward Taiwan remains perhaps the biggest potential geopolitical shock to the global economy, given Taiwan’s strategic importance to global semiconductor production. Tariff increases are likely no matter who wins in November. Finally, we cannot dismiss potential oil shocks as the war in the Middle East rages. These risks seem manageable for the diversified global economy and financial markets at this point.
As always, please reach out to me with questions.
Sincerely,
Ryan L. Mason, CFP®, AAMS®
President, Wealth Advisor
CA Insurance Lic # 4065082
LPL Financial Insurance Lic # 0518721
LPLIA Lic # 0B91442