PLU Financial Review May 2024

Where is this year going, as we now enter June and for readers in the UK the pressing question remains, will the weather finally turn and some summer sun soon be with us?

There’s an old adage that says “sell in May and go away, don’t come back until St Ledger’s Day”, which is the idea that between the end of April and the middle of September (when the horses run in a famous race in Doncaster) markets tend to underperform.

That being said, over the last 30 plus years, this strategy would have lost you money and global equities actually gained +3.7% over the course of last month, so perhaps adages such as these can’t reliably predict the future after all?!

In terms of predicting the future, the debate on when the Federal Reserve in the US will start to cut interest rates remains front and centre and having seen a raft of mixed data come out of the US last month, both the bulls and bears seem to have something to point to in order to back their views. We call that ‘confirmation bias’…and it rarely pans out!

Some forecasters continue to believe that the Fed will be inclined to hold fire on rate cuts for now and they expect it to be the back end of the year.

With inflation still a little hotter than central bankers in the US would like, that seems far more plausible, and with company management teams starting to moderately guide down earnings expectations, that would suggest things are starting to slow a little.

There has been much discussion about ‘soft landings’, which is the idea that central bankers can tame inflation without causing a recession by not making the monetary environment too inhospitable. Indeed there is still a path to an outcome which avoids a particularly nasty recession, but the months ahead and the Fed’s actions will continue to be key.

“When America sneezes, the world catches a cold”…perhaps there is a place for old adages after all?