- The S&P 500 gained +6.2% in May, marking its best month since November 2023 and its best May since 1990.
- The index snapped a 3-month losing streak, avoiding what would’ve been its longest monthly decline in over a decade. Steve points out that when a 3-month streak ends with a bang (+5% or more), forward returns have historically been bullish.
- Based on the 10 prior signals since 1970, the S&P 500 has always been higher one year out, by an average of +20.7%. One month later? Still higher every single time, by an average of +2.5%.
The Takeaway: The S&P 500 rose +6.2% in May, ending a 3-month losing streak. When losing streaks are broken with a bang, the S&P 500 has historically trended higher with minimal interruption over the next year.
| One of the things I love most about bull markets is how they try to include everyone. Everyone is making money. Whether it’s growth stocks or value stocks. US stocks or international stocks. Gold or bitcoin. It’s all working and we’re all happy. The parties are better. You get the picture. And the reason this is true is because most risk assets participate in bull markets. Even the bad ones join the party eventually. And of course, we can always find bad stocks that are bucking the trend and falling, but I’m talking about subgroups and thematics. Most areas end up working. At the end of a sustained bull market, the list of groups that didn’t go up will be very short. It’s a hallmark characteristic of the good times. The leaders drag the laggards higher. The worst ones end up looking more like the best ones. And not the other way around. This is often referred to as sector rotation. But it’s really just an expansion in participation when it occurs over longer timeframes. I guess what I’m saying is that bull markets make it hard to miss. And this is what has me thinking about healthcare stocks today. Here’s a look at SPDR Healthcare $XLV relative to the S&P 500: |
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| I understand there are some political headwinds, but holy cow. How much worse could it get for this battered sector?
XLV is at the same level it was back in 2008 relative to the broader market. There has been literally zero alpha here for the last quarter century. The 4-week rate of change (similar to a rolling monthly) recently hit its lowest level in history for the XLV/SPY ratio. The bottom line is being a health care investor has been really terrible for a really long time. But I think we’re near the end of the road here. It appears this extreme momentum reading is signaling exhaustion. It is time for healthcare stocks to participate in this bull market, and even assume a leadership role, if only for the short term. So we figured we’d get ahead of this trend and identify the best candidates to fuel the rebound when it comes. Here’s a table showing the top-performing healthcare stocks since the market bottomed last month. |
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| There is a nice mix of names from various industries. And more importantly, there are plenty of bullish setups that are actionable right here, right now.
I like the idea of adding exposure to some of these leaders as a way to position for healthcare rotation in the future. |
Now a roundup of most sectors for May:
Bit of a data dump.
But basically: US Administration to run hot inflation via QE so that nominal GDP = 6% or higher to reduce debt/GDP. That means stocks higher, Gold higher, probably Crypto higher and Bonds lower, USD lower.
Commodities which NORMALLY would trade higher in an inflationary environment will not. The reason for this is that commodities will become exchangeable as against gold. Gold will be the commodity that benefits from the inflation.
The BIG risk is AI. If AI moves as fast as suggested in the various articles yesterday, and unemployment hits 20%, we will be in a massive DEFLATION where the value of the debt is increasing. This is the 1930’s scenario on steroids. The banking system will collapse as it did in the 1930’s. This is a risk worth keeping an eye on going forward.
Of course currently AI is the growth story and stocks like NVDA are being massively rewarded, driving further investment in this area. Which of course encourages further development and quicker advances.
Mr Saylor’s thesis that BTC benefits from AI is hokum. The continued (for the moment at least) correct strategy is Buy and Hold. As all the copycats load up on BTC at ever increasing prices, yes the bubble increases and early buyers and holders are on paper rich(er).
What happens if you want to sell?
If you are early through the exit, you will be fine. Once everybody starts to sell, profits start to evaporate quickly.
Why would you ever sell?
Because once 21 million is hit there is no new supply for new buyers to enter on. This is actually a problem, not a benefit when the correct strategy is buy and hold.
It’s a problem because it has no use value. It’s not used for anything. Gold is the (once again) world’s reserve asset. You don’t need 2 reserve assets. Gold’s ascendancy is being driven by China and BRICS in this area. BTC has missed the boat.
This copycat strategy has repeated in financial markets forever. In the 1920’s it was Trust companies, in the 1960’s Conglomerates, in the 2020’s BTC banks. All end badly.
The added complication of TETHER just highlights the potential criminality that is present. Never a good sign.
jog on
duc
