Sell in May, possibly this time?

Following on from last Friday’s better than expected growth number for the US economy we had a slightly better first-quarter GDP report from Europe on Wednesday morning. The economy grew at 0.4% in the first quarter and at an annualised rate of 1.1%. However, inflation in Germany also rose above expectations to 2% year on year; this could suggest economic growth is improving. It may also unsettle German bankers once again as the low-interest rate policy is likely to remain for the year ahead. The EU harmonised inflation rate also rose above expectations to 2.1%.

In other parts of the globe as expectations for the Chinese economy have been rising recently the latest Purchasing Manager Surveys came in an as something of a disappointment. Likewise, for the Chicago Purchasing Manager Survey for April, coming in well below expectations. In contrast, consumer spending grew in March beyond expectations, despite household incomes growing less than expected as consumer inflation has been falling.  If one tries to paint a picture of the current economic conditions around the globe, the data remains mixed. However, the consensus view remains one of a gently slowing economy, rather than a global economy contracting.  Goldilocks appears to be still enjoying the porridge.

Later on Wednesday, we will get the announcement from the Federal Reserve for the latest interest rate decision. US GDP growth may have come ahead of expectations for the first quarter of 2019. Despite this, the continued mixed economic picture and weaker inflation data should allow the Fed to maintain their dovish stance. It will be interesting to her what Jerome Powell’s take is on the first quarter GDP estimate.

On Thursday we get the latest Bank of England interest rate decision and inflation report as economic data for the first quarter continues to beat expectations.

On Tuesday the S&P remained resilient despite weakness in the Nasdaq technology index after weak revenues from Alphabet, the Google parent. Sell in May has not worked over the last couple of years unless you decided not to buy back on St Ledgers Day in 2018. With the S&P 500 close to record highs having climbed 16% in the first third of the year. Putting the annualised rise at almost 50%. That feels as if we have come a little too far too quickly.

Posted on April 30, 2019 .