Sell in May or stay and play?

The ‘Sell in May and go away’ slogan of yesteryear should stay there. In the last decade, following that advice in the stock market would have lost you money. This year, you would have really been disappointed.

Stocks continue to climb despite the conflict in the Middle East, oil prices, and inflation worries. The old Wall Street adage about May hasn’t held true at all over the last decade, with the average gain topping 7% for the May through October period.

This year, the gains have been much better than average for the first week in May, and most analysts believe markets are set to continue their bull run. This is despite the latest results from the University of Michigan’s Consumer Sentiment Index, which dropped to a record low of 48.2 in early May. One-third of those polled cited higher gasoline prices, and another 30% mentioned tariffs as reasons for their dour outlook.

And speaking of those two concerns, this week the Court of International Trade ruled that Trump couldn’t use the 1974 Trade Act to impose his 10% tariffs. These levies were put in place in February after the Supreme Court struck down his “Liberation Day” tariffs. But consumers should not expect refunds for the extra costs they have incurred due to these tariffs over the last few months. The government and businesses will pocket any refunds.

Gas prices, however, continue to climb higher as Trump’s War remains bogged down in mistruths, exaggerations, and ineptitude. The administration is claiming that the ‘ceasefire (which isn’t) marked the end of the war (now called an “excursion”). His Secretary of War, Peter Hegseth, testified before the Senate Armed Services Committee that the ceasefire stopped the clock on the eve of the 60-day mark of the war.

That avoided a major statutory deadline for the president to withdraw forces or seek approval from Congress to continue the fight. Since then, despite both countries trading missile fire, the supposed ceasefire is still in effect. In any case, the Straits of Hormuz are still closed despite last weekend’s two-day Operation Freedom scheme to escort boats through the disputed straits.

Trump’s go-to reliance on his own interpretation of events: “Attack, Deny, and claim Victory,” is wearing thin. A new acronym, NACHO--“Not a Chance Hormuz Opens” –is making the rounds of an increasingly cynical Wall Street. However, financial markets are looking beyond this debacle.

First-quarter earnings were stellar, with more than 84% of companies beating estimates. In addition, their guidance seemed to reflect a more upbeat future than present circumstances might dictate. Technology companies in the artificial intelligence space are the most positive, which is one reason both large-cap technology and AI names are leading markets higher.

Next week, we should see the entrance of the new Fed chief, Kevin Warsh, although I do not expect any moves in either interest rates or monetary policy in the immediate future. In addition, President Trump, along with a gaggle of U.S. CEOs, is scheduled to visit China before the end of the month. Investors are hoping that the two sides will play nice and may even come to an agreement on how to end the ‘non-war’ with Iran.

Bulls evidently want to push stocks higher. Momentum traders keep buying on every little pullback. The war has become old news. Only some concrete turn of events, rather than this continued war of words, would put it back on the front burner. Inflation, while still a risk, is still some time further into the future. In the meantime, May seems to be destined for further gains.

Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires.  Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc.  None of his commentary is or should be considered investment advice.  Direct your inquiries to his website at www.schmicksretiredinvestor.com. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.