May-October U.S. Stock Slumps Leave Broad Mark: Chart of the Day
By David Wilson
April 22 (Bloomberg) – Seasonal weakness in U.S. stocks may weigh on investors this year regardless of which types of companies they favor, according to Brian Belski, BMO Capital Markets’ chief investment strategist.
As the CHART OF THE DAY illustrates, all of the Standard & Poor’s 500 Index’s 10 main industry groups fared worse between May and October on average than they did between November and April. The comparison is based on data since 1990, the first full year in which the current group indexes were compiled.
The index’s three top performers in the November-April period – industrial, raw materials and consumer discretionary, a category which has retailers, media companies, automakers and homebuilders – each dropped in the next six months on average. All the others had smaller gains.
“The likelihood of some sort of surprise pullback is lurking,” Belski wrote in an April 17 report. The New York-based strategist cited the seasonal pattern, which is in keeping with the adage of “sell in May and go away,” and the S&P 500’s price-earnings ratio.
At yesterday’s close, the index was valued at 17.3 times earnings. The P/E was higher than an average of 16.4 since the 1950s, mentioned in the report.
“This year is complicated by the fact that U.S. is holding mid-term elections,” Belski wrote. “Performance deteriorates further during those years.”
Only three of the S&P 500 groups have moved higher on average between May and October in the middle of presidential terms since 1990, the report said. They are telecommunications, health care and consumer staples, or food, beverage, tobacco and household-product companies.