There is a well-worn saying in stock markets - which does not mean it is accurate, of course - that gets rolled out at this time of year.
“Sell in May and go away, don’t come back till St Leger’s Day.”
For those not familiar with the horse-racing calendar, St. Leger’s day is in September. It references an expectation that markets do not do much during the summer, which is somewhat outdated. Some investors had wished they sold out last September and could have enjoyed a relatively less stressful six months since, given the market volatility.
This week has seen the US broad S&P 500 index move close to the lows set for the year so far, and similar for the more tech-biased NASDAQ. Once again, it is the specter of inflation that is haunting many investors’ dreams.
Some analysts expect the US central bank to have to raise rates more aggressively than thought even a month ago. This sort of uncertainty is unlikely to calm sentiment in stock markets that have experienced swings of up to 15% from highs to lows so far this year.
This Week’s Major Announcements
US GDP data out today and the EU equivalent following on Friday will give some insight into the health - or otherwise - of those respective economies. Retail sales data in the UK from last week showed a surprise fall, and traders may be watching these two releases to see if there are signs already of consumers starting to rein in spending as a result of a higher cost of living.
The activity of consumers is likely to be more front and center this year. It feels like we have yet to feel the full brunt of the rise in global commodity prices, particularly when it comes to food. We may see investors continue to be cautious, and the main markets experience major swings.
Musk's Twitter Takeover
As a light diversion from inflation, the big company news so far has been Elon Musk’s deal to buy Twitter (NYSE:TWTR) for $44bn. In less time than some people decide to buy a new pair of shoes, the world’s richest man has snapped up the popular - but underperforming compared to its peers - social media platform.
Interestingly, the stock price is still trading a few dollars below the proposed takeover price - suggesting that, just possibly, investors still have some skepticism about whether the deal will go through. Perhaps we will know more by St Leger's Day.
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