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Wall Street has seen a wobbly start to May 2020 much in line with the old adage “sell in May and go away,” after the best April in 82 years for U.S. large-cap equity gauges. President Trump’s renewed threat of tariffs on Chinese goods due to mishandling of the coronavirus incident and a sharp decline in shares of Amazon (AMZN - Free Report) , one of the key contributors of the recent rally, caused the market slump at the start of the month.
Apple (AAPL - Free Report) , despite beating on both lines, has also seen shares spiralling down as it offered no guidance and indicated pressure from the coronavirus. In fact, the underperformance by the online retail and cloud giant and the iPhone maker led the tech-heavy NASDAQ to plunge 3.2% on May 1. The other two key U.S. equity gauges — the S&P 500 and the Dow Jones — lost 2.8% and 2.6%, respectively, on the day.
Should You Go by the “Sell in May” Saying?
Probably not. Things are totally different this year with the world experiencing the worst crisis since the World War II in the form of the coronavirus outbreak. So, walking along the regular path won’t make you profitable this time. Let's delve a little deeper.
The proverb is ingrained in the S&P 500’s awful historical run for the May-to-October period. May has been a subdued month with average gains of 0.09% since 1950. But the saying hasn’t held well in recent times. Per an article published on CNN.com, the proverb proved itself wrong in the past few years with the May-October period turning pretty profitable.
One needs to put more emphasis on the massive Fed and U.S. government stimulus, as much as $8-trillion global fiscal stimulus, future update on trade war, corporate earnings estimates and last but not the least coronavirus-related drug developments. A handful of states have started to open up and ease restrictions. So, demand would definitely open up albeit in a measured manner amid the ongoing uncertainty about the cure of the disease.
Meanwhile, Gilead Sciences Inc.’s GILD antiviral drug Remdesivir received FDA approval for emergency use in COVID-19 patients. It is the first medication supported by early clinical data to be made available to fight the novel coronavirus. Moderna Inc.MRNA, which is developing experimental vaccines, said it had entered an agreement to manufacture a billion doses a year. This optimism should keep Wall Street charged up.
Against this backdrop, we highlight a few ETFs that could shower gains on investors in an otherwise defamed May.
According to equitylclock.com, consumer staples enjoys a seasonal tailwind in May. This is truer amid the pandemic as cash-strapped consumers would focus more on staples than discretionary products as the economy reopens. The sector is expected to log 6.1% earnings gain in Q1 and 12.3% earnings slump in Q2, per Earnings Trends issued on Apr 29, 2020. The figures are pretty upbeat when compared with the 15.5% Q1 slump and 34.3% Q2 decline expected for the S&P 500.
The Fed’s super-dovish stance since March and the resultant weakness in the greenback, a mammoth government stimulus, lower oil prices, cheaper valuation and relatively low debt of the mining companies should continue to benefit gold mining stocks (read: 5 Reasons Why Gold Mining ETFs & Stocks Have More Room to Run).
Internet or online shopping and payment activities remains hot amid the coronavirus outbreak as these have less to do with human contact and conform to social distancing. Customers are choosing digital payments to serve their bills for essential items, while merchants and utility providers are encouraging the same. While such practice was pretty prevalent in developed countries, emerging countries too are now seeing a rising trend. China is launching trialling payments in its digital currency in four cities. The fund is still down 24.4% from the 52-week high level (read: Bet on Digital Payments With These ETFs and Stocks).
Coronavirus-induced economic mayhem has suddenly ruined companies’ favorite ways of shareholders’ value maximization. There have been rampant cuts in share repurchases and dividends. Given the situation, investors may choose to bet on stocks that are high quality in nature and that have a long history of dividend hikes (read: Fearing a Cut in Current Income? 5 Safe Dividend ETFs).
Who can miss this healthcare ETF in this medical emergency? Despite the recent rally, the fund is down 6.9% from the 52-week level. This calls for some more upside in the fund (read: ETF Asset Report of Coronavirus-Inflicted April).
Preferred securities as an asset class are hybrid securities, having traits of both equity shares as well as fixed income securities. These are classified as shares having a fixed rate of dividend on their face value (par value). The fund yields 5.79% annually, which is pretty higher as compared with 0.64% yield offered by the benchmark U.S. treasuries as of May 1.
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Don't Sell in May, Rather Buy These ETFs
Wall Street has seen a wobbly start to May 2020 much in line with the old adage “sell in May and go away,” after the best April in 82 years for U.S. large-cap equity gauges. President Trump’s renewed threat of tariffs on Chinese goods due to mishandling of the coronavirus incident and a sharp decline in shares of Amazon (AMZN - Free Report) , one of the key contributors of the recent rally, caused the market slump at the start of the month.
Apple (AAPL - Free Report) , despite beating on both lines, has also seen shares spiralling down as it offered no guidance and indicated pressure from the coronavirus. In fact, the underperformance by the online retail and cloud giant and the iPhone maker led the tech-heavy NASDAQ to plunge 3.2% on May 1. The other two key U.S. equity gauges — the S&P 500 and the Dow Jones — lost 2.8% and 2.6%, respectively, on the day.
Should You Go by the “Sell in May” Saying?
Probably not. Things are totally different this year with the world experiencing the worst crisis since the World War II in the form of the coronavirus outbreak. So, walking along the regular path won’t make you profitable this time. Let's delve a little deeper.
The proverb is ingrained in the S&P 500’s awful historical run for the May-to-October period. May has been a subdued month with average gains of 0.09% since 1950. But the saying hasn’t held well in recent times. Per an article published on CNN.com, the proverb proved itself wrong in the past few years with the May-October period turning pretty profitable.
One needs to put more emphasis on the massive Fed and U.S. government stimulus, as much as $8-trillion global fiscal stimulus, future update on trade war, corporate earnings estimates and last but not the least coronavirus-related drug developments. A handful of states have started to open up and ease restrictions. So, demand would definitely open up albeit in a measured manner amid the ongoing uncertainty about the cure of the disease.
Meanwhile, Gilead Sciences Inc.’s GILD antiviral drug Remdesivir received FDA approval for emergency use in COVID-19 patients. It is the first medication supported by early clinical data to be made available to fight the novel coronavirus. Moderna Inc. MRNA, which is developing experimental vaccines, said it had entered an agreement to manufacture a billion doses a year. This optimism should keep Wall Street charged up.
Against this backdrop, we highlight a few ETFs that could shower gains on investors in an otherwise defamed May.
Consumer Staples Select Sector ETF SPDR (XLP - Free Report)
According to equitylclock.com, consumer staples enjoys a seasonal tailwind in May. This is truer amid the pandemic as cash-strapped consumers would focus more on staples than discretionary products as the economy reopens. The sector is expected to log 6.1% earnings gain in Q1 and 12.3% earnings slump in Q2, per Earnings Trends issued on Apr 29, 2020. The figures are pretty upbeat when compared with the 15.5% Q1 slump and 34.3% Q2 decline expected for the S&P 500.
VanEck Vectors Gold Miners ETF (GDX - Free Report)
The Fed’s super-dovish stance since March and the resultant weakness in the greenback, a mammoth government stimulus, lower oil prices, cheaper valuation and relatively low debt of the mining companies should continue to benefit gold mining stocks (read: 5 Reasons Why Gold Mining ETFs & Stocks Have More Room to Run).
ETFMG Prime Mobile Payments ETF (IPAY - Free Report)
Internet or online shopping and payment activities remains hot amid the coronavirus outbreak as these have less to do with human contact and conform to social distancing. Customers are choosing digital payments to serve their bills for essential items, while merchants and utility providers are encouraging the same. While such practice was pretty prevalent in developed countries, emerging countries too are now seeing a rising trend. China is launching trialling payments in its digital currency in four cities. The fund is still down 24.4% from the 52-week high level (read: Bet on Digital Payments With These ETFs and Stocks).
SPDR S&P Dividend ETF (SDY - Free Report)
Coronavirus-induced economic mayhem has suddenly ruined companies’ favorite ways of shareholders’ value maximization. There have been rampant cuts in share repurchases and dividends. Given the situation, investors may choose to bet on stocks that are high quality in nature and that have a long history of dividend hikes (read: Fearing a Cut in Current Income? 5 Safe Dividend ETFs).
Health Care Select Sector SPDR Fund (XLV - Free Report)
Who can miss this healthcare ETF in this medical emergency? Despite the recent rally, the fund is down 6.9% from the 52-week level. This calls for some more upside in the fund (read: ETF Asset Report of Coronavirus-Inflicted April).
iShares U.S. Preferred Stock ETF (PFF - Free Report)
Preferred securities as an asset class are hybrid securities, having traits of both equity shares as well as fixed income securities. These are classified as shares having a fixed rate of dividend on their face value (par value). The fund yields 5.79% annually, which is pretty higher as compared with 0.64% yield offered by the benchmark U.S. treasuries as of May 1.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>