Investor Sentiment
Bullish sentiment, that is, expectations that stock prices will rise in the next six months, rose 6.4 points to 38.5% and remains above its historical average of 37.5%.
Bearish sentiment, that is, expectations that stock prices will fall over the next six months, decreased 1.4 points to 32.5%.
Fear of market correction?
Since April 2, the S&P 500 has been in a correction phase since it set historical highs.
It is good to remember that the average annual peak-to-trough correction is -14.2% (since the 1980s). Last year it had a correction of -10.3%, but it still rose 24% during the year.
What’s more, in the S&P 500, from 1928 to 2023 (both included), in those 96 years there were 61 with a drawdown greater than -10%, that is, 64% of the years. Therefore, it falls within “normal”.
After a strong rise, when the cuts begin, it is quite common to see a correction that reaches the first Fibonacci retracement, which is around 4820. Therefore, going down to this level is within “normal” and there is no need to be scared.
We are in the month of May and we already know the famous seasonal pattern sell in May and go away. It originated in England and said: sell in May and go until Leger Day, which was a famous horse race in September that coincided with the end of summer and the return of investors to the markets.
This pattern is based on the fact that the Stock Market tends to perform better in the November-April period and worse in the May-October period.
But it seems that the pattern is no longer what it was. Just look at the last 12 years. The S&P 500 has had a positive return on 10 of those 12 occasions:
- 2012 +1%
- 2013 +10%
- 2014 +7.1%
- 2015 -0.3%
- 2016 +2.9%
- 2017 +8%
- 2018 +2.4%
- 2019 +3.1%
- 2020 +12.3%
- 2021 +10.1%
- 2022 -6.3%
- 2023 +0.6%
And if we take the last 10 years, we see that the average return has been +4%.
Ok, all this we just saw is regarding the S&P 500, but what about the rest of the markets in the last 50 years? Let’s see the difference in average performance between November/April and May-October:
- : +1.27%
- Italian Eb: +1.80%
- French: +1.78%
- British Ftse: +1.14%
- German: +1.16%
- Japanese: +1.44%
Therefore, the conclusion is clear:
1º Historically speaking, in practically all the major stock exchanges in the world the November-April period is more profitable than May-October.
2º In the last 12 years, the “cursed” period has had quite profitable behavior.
Ok, we have seen the May-October period, but what about the month of May? Well, in the S&P 500 the average return is the following:
- Last 50 years +0.14%
- Last 100 years +0.06%
Therefore, the sell in May pattern is numbers and in the last 12 years it has had a quite interesting performance.
The power of the last 10 minutes of a trading session
We know that the S&P 500 trading day is 6.5 hours, that is, 390 minutes. Well, this year we are seeing that it is really the last ten minutes that are playing the game.
Yes. This is because 33% of all operations of the day are executed during that final stretch, according to data from BestEx Research. 3 years ago it was 27% of all operations and it seemed like a lot, but this year that mark has been easily surpassed.
But it is being a common phenomenon in 2024, since it also happens in other markets. For example, in the Old Continent it is 28% (five percentage points more than four years ago).
The end of the good opens a window for the best
The S&P 500 has ended a streak of 5 triumphant months, further proof that everything comes to an end, good and bad.
But there is a quite positive aspect. And when a good bullish streak ends in the S&P 500 for 5 consecutive months, the index performs well in the following 3, 6 and 12 months.
Taking the last 7 times this happened, the subsequent (average) returns were as follows:
- 1 Month later: -0.1%
- 3 Months later: +3.3%
- 6 Months later: +7.6%
- 12 Months later: +12.4%
If we take the last 50 years:
- 1 Month later: +0.7%
- 3 Months later: +2.2%
- 6 Months later: +4.4%
- 12 Months later: +9%
Of course, past returns do not guarantee future returns, but when choosing, I prefer to have historical data in favor and not against.
How to take advantage of the boom in weight loss drug stocks
Weight loss drugs are in fashion and some companies have reflected this boom in their share prices, such as Eli Lilly (NYSE:) and Novo Nordisk (CSE:). But they are not the only ones, there is a good group of actions that are taking advantage of the issue.
For example, Viking Therapeutics is up +314% this year due to hopes that the company’s drug could potentially be more effective than its rivals. In addition, there is also always speculation that the company could be bought and is valued at only $6.9 billion.
But investors who prefer to invest in the sector as a whole and not in individual stocks can do so with the Tema Obesity & Cardiometabolic ETF (HRTS)
It’s the first ETF to try to give investors a broader way to take advantage of the obesity drug boom. He has 40 shares in his portfolio. The ETF launched on November 20, 2023 and manages $52 million in assets, charging an annual fee of 0.75% and is actively managed. It has only been around for 5 months but for example in the last 3 months it has risen +12%.
Among the main positions it has the following (weight in the ETF):
- Vertex Pharmaceuticals 5.24%
- Eli Lilly 5.03%
- Novo Nordisk 4.91%
- Amgen (NASDAQ:) 4.57%
- DexCom 4.07%
- Edwards Lifesciences 2.98%
- Cytokinetics 2.93%
- Chugai Pharmaceutical 2.92%
- Medtronic (NYSE:) 2.87%
- Ascendis Pharma 2.76
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