Sell in May and Go Away?

By Joyce Yu

Philadelphia, PA–Record low jobless claims failed to drive stocks market higher on Thursday as U.S. stocks fell weighted by technology shares.

From Apple to chip makers, tech firm shares were lower after a warning from Taiwan Semiconductor, the world’s largest contract chipmaker and an Apple supplier, on soft demand for smartphones and on the semiconductor industry’s growth this year sparked a tumble in chip stocks.

Over in China, the Shanghai Composite Index is speculating whether China’s state-run funds would defend 3,000, a key level of support for stocks around this time last year. China’s government, which has a long history of market intervention, has recently shown signs of prioritizing financial stability as the economy grapples with escalating trade tensions, uninspiring growth figures and tightening liquidity conditions. Large-cap banks and oil companies rose overnight.

Wednesday’s rally in large caps “is an important signal that the national team may have entered the market,” said Zhang Gang, a Shanghai-based strategist at Central China Securities Co. “The national team is likely to defend the Shanghai Composite at 3,000. They need to hit the brake to prevent the selloff from accelerating.”

The market has gone into correction territory since the end of January after staging a record rally at the beginning of the year. With the end of April looming, investors are bound to hear the old stock market adage “sell in May and go away, don’t come back ’till St. Leger’s Day.”

Goldman Sachs noted the three-month correlation of stocks in the S&P 500 index has now rocketed from a low of 9% in January to 52%, the largest and fastest change on record aside from the turmoil triggered by the Black Monday crash of 1987. Stocks tend to move in unison when investors are more nervous, and the ongoing investor shift towards cheaper, passive funds that buy all the stocks in the index they are tracking.

Former President Barack Obama’s chief economic adviser Austan Goolsbee thinks that economic growth is “okay, but not as good as the optimists believe.” In an interview with CNN, he suggested that the Federal Reserve should not raise rates too quickly, as the growth is fragile.

“There is the possibility that the economy cannot stand too many rate increases in too short of a time,” he said. “That would be the thing that leads to a recession.”


Please enter your comment!
Please enter your name here