Sell in May Didn’t Work – Is it Now Time to Buy in June?

Justin Freeman

Given the unprecedented events of the last 16 months, it’s not necessarily surprising that ‘Sell in May’ looks like it might not be panning out in line with historical trends. The global benchmark S&P 500 index was down 3.80% mid-month but finished in positive territory and on Friday posted a new all-time high.

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Buy-back in June?

The sell in May strategy does, of course, extend over a more extended period than the month itself and aims to capture market weakness over the slow summer months. Those tempted to scale back in risk after the six-month bull run will now be suffering from FOMO. Any last-minute changes of heart and buying back into the markets would offer extra momentum to the upside.

us500 chart 140621

Source: IG

Strong Fundamentals for Equities?

Major global equity indices posted a positive week starting on the 7th of June. EURUSD and GBPUSD posted negative weeks in the forex markets, suggesting a move away from risk, but equities went in the other direction. That wasn’t the only disconnect. In the precious metals market, gold was down 1.28%, but silver was up 0.87%. A significant move for the pair, not only due to the reverse correlation but also because of the size of the movement.

Instrument 7th Jun 14th Jun Hourly Daily % Change
GBP/USD      1.4125      1.4108 Strong Sell Sell -0.12%
EUR/USD      1.2149      1.2112 Neutral Strong Sell -0.30%
FTSE 100        7,062        7,171 Strong Buy Strong Buy 1.54%
S&P 500        4,218        4,251 Strong Buy Strong Buy 0.78%
Gold        1,881        1,857 Strong Sell Sell -1.28%
Silver        2,748        2,772 Strong Sell Neutral 0.87%
Crude Oil WTI        68.99        71.14 Strong Buy Strong Buy 3.12%
Bitcoin      35,960      39,575 Buy Buy 10.05%

Source: ForexTraders

Those wondering what all this might mean for the markets might lean towards explaining the disconnects in terms of economic activity. A boom in production would explain the relative strength of silver, which is used in industry to a greater extent than gold. Equities picking up pace and risk-on currencies sliding would also be explained by analysts forecasting the global recovery will be better than expected.

FTSE in Focus

The FTSE 100 index has still not returned to pre-Covid levels. While other indices, particularly those in the US, have not only clawed back their losses but have moved up further. The index has been a perennial underachiever. Brexit fears loomed over the economy, and the uncertainty was matched by the firms which make up the index being out of favour. Oil stocks crashed during the 2020 lockdown, and banking stocks struggle in low-interest-rate environments. A little bit of inflation would help the commodity sectors and finance. That could be on the cards after the US posted its Consumer Price Index data last week.

Source: IG

The US Federal Reserve meets on Wednesday when it will indicate how committed it is to be sticking with a stock-friendly monetary policy. While inflation is historically bad for share prices, the FTSE 100 index offers better protection than most others. That might partly explain why buyers are moving into the market.

If you want to know more about this topic or have been scammed by a fraudulent broker, please contact us at [email protected]

Justin Freeman

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