When Things Are Too Good
So many seem to be waiting for a swoon.
Stocks just had their best May in 15 years.And, according to Stock Trader’s Almanac Editor in Chief Jeffrey Hirsch, the presidential election year effect could mean a positive June too.
Hirsch notes that the S&P 500, the Dow Jones Industrial Average, and the Russell 1000 have all recorded average losses over the last 21 years.
The Nasdaq Composite and the Russell 2000 have actually posted average gains of 0.4 percent and 0.8 percent during the same time frame.
During election years since 1950, June has followed a similar pattern. “But gains have been notably stronger,” Hirsh writes, “and all five indexes finish the month positive.”
Average election-year gains during June range from 0.9 percent for the Dow to 1.9 percent for the Nasdaq.
Seems like Friday’s report from the Bureau of Labor Statistics on the May employment situation will be a big factor here.
Investors, traders, and speculators will be watching wage and salary and hours-worked data – in addition to the usual headline-and-subhead grabbing unemployment and labor force participation rates – for signs the US consumer’s tank is running dry.
The economy has been so strong that some observers are talking about a rate hike rather than a rate cut as the Fed’s next best move.
That’s not likely. Jerome Powell and company feel pretty good about the restrictions of a 5.25 percent to 5.50 percent federal funds target range.
It’s actually pretty good news: “Think of the Fed’s policy stance as higher for longer than almost anyone anticipated, because the US economy has been stronger for longer than almost anyone imagined.”
That’s the money graf from Nicholas Jasinski’s weekend cover story for Barron’s, headlined “The Fed Won’t Cut Rates This Year.”
By the working of the well-known and totally irreverent magazine-cover indicator, the Fed would cut after every meeting from here to December.
That’s not likely either. But the underlying truth is what it is: “The US economy has been stronger for longer than almost anyone imagined.”
In addition to May jobs data on Friday at 8:30 a.m. ET, this week we’ll see flash PMI data from S&P today (manufacturing) and Wednesday (services.)
Wednesday’s productivity data will provide some good information, as will, of course, the ever-noisy initial jobless claims data on Thursday.
As of June 1 our central bankers are in a blackout period ahead of the June 11-12 Federal Open Market Committee, so we won’t be hearing from them this week.
Enjoy that silence.