An old stock-market adage calls for investors to “sell in May and go away.” Yet to Fundstrat Head of Research Tom Lee, multiple factors make it wiser to “buy in May” this year. Stocks rose last week to extend their weekly win streak to three, and Lee believes more gains are likely for this month.
In his view, stocks last week were helped by soft jobs data from May 3, which helped convince investors that the “economy is no longer red-hot” and that the Fed is thus increasingly likely to stay dovish. Those numbers are also consistent with the latest weekly unemployment data, which rose to the highest level since August 2023.
As Head of Technical Strategy Mark Newton pointed out, the bond market’s immediate response to the jobless numbers was positive: “Rates plunged, and we also saw the dollar pull back.” In fact, Newton continued, “I sense that this could be the start of why the bond market actually starts to rally pretty sharply between now and late summer. I think yields are going to pull back. I think the dollar is going to also weaken, and I think that this recent weakening of economic data sort of sets the tone for why this is going to happen."
Summing his views up, Newton said, "My thinking is the S&P [500] will challenge the March highs of around 5,265. If and when it gets above that, we could see it rise to 5400." He added, "Don’t forget about seasonality. Generally, markets tend to do very, very well during this time of most election years – and in years where the prior year was up more than 10% they tend to do even better. So I think between now and the fall should be a great time for a broad-based rally.”
Lee is similarly constructive. "We are still in the ‘buy in May’ camp. The fact that stocks rose this week is a positive signal. And next week we expect incoming data (CPI, PPI) to show overall softening of the key components of inflation."
Chart of the Week
What is FS Insight?
FS Insight is a market-leading, independent research boutique. We are experts in U.S. macro market strategy research and have leveraged those fundamental market insights to become leading pioneers of digital assets and blockchain research.
Tom Lee's View
Proprietary roadmap and tools to navigate and outperform the equity market.
Macro and Technical Strategy
Our approach helps investors identify inflection points and changes in equity leadership.
Deep Research
Our pioneering research provides an understanding of fundamental valuations and risks, and critical benchmarking tools.
Videos
Our macro and crypto videos give subscribers a quick and easy-to-understand audiovisual updates on our latest research and views.
US Policy Analysis
Our 40-year D.C. veteran strategist cuts through the rhetoric to give investors the insight they need.
