After turning in one of its best January-April performances in more than 20 years, the stock market has suddenly run out of gas in May. We’re nowhere near correction territory – the S&P 500 is down about 2% so far this month after climbing more than 18% in the first four months of the year, and up 22% since the Christmas Eve bottom. Yet the financial press has been filled with “sell in May and go away” stories, citing the Wall Street urban legend – or historical trend, take your pick – that all the money that’s going to be made this year has already been made, so you may as well cash in your winnings and sit out the rest of the year.
The major impetus behind the dip – which doesn’t even meet the definition of a “dip” yet since few people seem to be buying on it – is President Trump’s announcement that he has upped the ante on the trade war with China, raising worries that talks between the two countries will collapse. The recent spate of high-profile IPOs from Lyft, Uber, Pinterest and other companies is also signaling that the stock market may have peaked.
Which raises the question: Is the Powell Put going to come to the stock market’s rescue again in the near future? How deep will a drop in the stock market – assuming it keeps dropping – have to get before the Federal Reserve intervenes and cuts the federal funds rate? Continue reading "Sell In May? Wait For The Powell Put"