U.S. equity indexes are on track to register their best start to a year in decades and the sharpest April gains in about 10 years. The solid returns thus far in the fourth month of 2019, however, may raise questions about how gains will shape up in the coming period, as Wall Street focuses on a popular seasonal investing adage.
“As I said, the reason why it won’t work is really because EPS [earnings-per-share] growth expectations have been massively revised down. So 2019 EPS growth went from 10% in September 2018, to 3.2% currently, in tandem with the U.S. economic surprise indicator,” she explained. “A lot of bad news is already reflected in expectations, while China’s ongoing monetary and fiscal support and central banks’ ‘Great Retreat’ should put a floor under risky assets for now,” Huynh said, underscoring points she made in a Tuesday research note titled, “Why ‘Sell in May and go away’ won’t work this year.”
For even bullish investors, however, it may be hard to imagine stocks ringing up further gains, even modest ones, after the current pace of returns and in the so-called late-stage economic cycle under way.