Just a brief note this evening…
Huge global data dump today, and, without giving you the details, as you no doubt suspect I’m seeing some of the worst economic data of my nearly 36-year career. More on that in our macro update in the next day or two…
I’ll comment on just one data point this evening, as it relates to the economy (and reflects on the global economy) of the nation that was first in, and ostensibly first out of “lock down”.
The obvious question around China presumably making its way back in terms of manufacturing capacity is, who are they selling to? Well, the country’s export PMI reading today came in at 33.5. Which, by the way, is an extremely low reading; just a few points higher than the shock-low of February (see chart). Of course that just tells us what we already know; global economic activity is exceedingly weak, and, regardless of what some might suggest, strength is likely to come at a slow, gradual pace over many months to come; assuming, frankly, that all goes as well as possible.
As for equity markets taking a hit today, while you know that my base case is ultimately lower for stocks, don’t put too much weight on today’s action. It’s the end of the month and stocks bounced back impressively in April, and there are portfolios/funds that are tied to target stock/bond allocations, many of which are rebalanced at the end of every month (it’s a bigger deal at the end of each quarter btw). It’s often not worth mentioning, but when one asset class has an unusually good month, we can look for the rebalancing (the selling of that asset class) to potentially have an overall impact.
Now we’re entering the historically-messy season: That old Wall Street adage “sell in May and go away”. And, as I’ve mentioned herein, ironically, mid-May is when the first impressive rallies of the past two bear markets peaked, with stocks plumbing new lows during the ensuing months.
Not saying that history has to at all repeat, but it is worth taking note of historical seasonality, particularly during times like these. If only because others (traders) pay attention to it…
Here’s a composite 20-year graph (%) of SPY (tracks the S&P 500). Note that the May to November period has been the least profitable, and often the most problematic throughout history. I boxed in May by itself as well…
Sorry folks, but I promise, when I have legitimately good news to report I’ll feature it in bold letters herein.