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Market Preview Week of 5/29/17 - Investor Sentiment

by Caldwell Trust

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Your Market Update:

  • Summertime historically brings lower trading volume and returns
  • Equities move higher; domestic bond yields back up ever so slightly
  • Traditional retailers on balance continue to disappoint on earnings announcements
  • GDP for Q1 revised upward from initial reading                                           

As we head into June, it might be worthwhile to revisit the old Wall Street adage ‘sell in May and go away” and the phase “the summer doldrums’ as it relates to Wall Street.


Sell in May… refers to relative equity market performance between the May - October period and the November – April period. In a recent article penned by Bob Pisani it was noted that since 1950 the S&P 500 has had an average return of 0.4% for the May - October period versus 7.4% for the November – April period. In addition to the relative inferior performance during the mid – year period, volumes on major domestic exchanges also run below normal during the May – October period. *


The “summer doldrums” occur between early July and the end of August – roughly Independence Day through Labor Day. Trading volumes are well below normal and the market typically is listless as a lot of investment managers take vacation.


Moving in to this slower period it is important to remember that the total return on the S&P 500 is  8%+ for the year, and the broad domestic bond markets have realized positive albeit low returns so far in 2017. It presents an opportune time to rebalance and reposition portfolios as we approach the 2nd half of the year.


For the week, domestic equity markets were up strongly; the yield on the 10-year Treasury bond backed up slightly and remains solidly in the low end of the post-election trading range. The few earnings announcements for the week were mixed, and retailers reporting continued to struggle for the most part.


Economic releases continue to come in mixed; Q1 GDP was revised upward last week to 1.2% from the initial reading of .7%. Over the last number of years Q1 GDP has been lower than Q2, Q3, and Q4. The economy continues to expand but at historically below normal rates.


Earnings this coming week are really light:

Tuesday – Analog Devices

Wednesday – Palo Alto Networks

Thursday – Dollar General


Indices for the week and YTD are as follows:

S & P 500 up 1.4% for the week; YTD index return is 7.90%

NASDAQ Composite up 2.08% for the week; YTD index return is 15.4%

Dow Jones Industrial Average up 1.3% for the week; YTD index return is 6.70%

Benchmark 10-year Treasury bond yield stands at 2.24% basically flat for the week.


*Source: StockTradersAlmanac.com 

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