"Fly Me to the Moon!"

Hi There! In my recent readings, I stumbled upon a captivating tree from New Zealand, known as the Pohutukawa, or the New Zealand Christmas tree. Famous for its striking red flowers that bloom in December, the Pohutukawa is more than just a seasonal spectacle. It embodies an incredible resilience, thriving for up to 1,000 years amidst the ever-changing world. Imagine the tales these ancient trees could share if they could speak—the storms they've weathered and the centuries they've witnessed. This enduring strength of the Pohutukawa resonates deeply with me, echoing my own journey through life's challenges. Like these majestic trees, I am reminded of the strength I possess to withstand and flourish, regardless of the adversities I face.

Alright, let’s dig in!

Last week, the financial markets exhibited a nuanced reaction to the U.S. Federal Reserve's decision to maintain interest rates at the 5.25%-5.50% range, alongside comments from Fed Chair Jerome Powell hinting at possible delays in anticipated rate cuts due to persistent inflation concerns. Despite the uncertainty around monetary policy, stock markets showed mixed movements:

• The Dow Jones Industrial Average edged up slightly by just under 0.1%, signaling cautious optimism among investors.

• The S&P 500 saw a modest increase of 0.1%, marking its fourth consecutive session of gains, reflecting steady investor confidence across broader market sectors.

• In contrast, the Nasdaq slightly dipped by about 0.1%, primarily affected by disappointments in the tech sector, notably after Advanced Micro Devices (AMD) reported disappointing earnings, leading to a nearly 10% drop in its stock price and a significant reduction in market value.

Significant corporate developments also played a key role in shaping last week’s market dynamics:

• Apple’s (AAPL) shares jumped 6% following its announcement of a substantial share buyback plan and new initiatives in AI development, which resonated positively with investors.

• Amgen’s (AMGN) stock soared almost 13%, marking its best performance since 2009, spurred by optimistic updates on a new weight loss drug from its CEO.

• Despite better-than-expected revenue, Coinbase (COIN) saw a mixed response post-earnings, as the broader outlook remained overshadowed by the volatile cryptocurrency market.

• Berkshire Hathaway (BRK.A) reported a robust 39% increase in operating earnings and a 5% rise in revenue, surpassing estimates and providing a bright spot in an otherwise uncertain market.

Oil prices also mirrored the market’s cautious sentiment, with both Brent crude and U.S. West Texas Intermediate crude finishing lower last Friday, marking their steepest weekly loss in three months. This downturn was influenced by the mixed jobs data and persistent concerns about the potential impact of sustained high interest rates on economic growth.

In the cryptocurrency sector, Bitcoin (BTC) exhibited resilience last week, recovering swiftly from a dip to $56,000 earlier in the week. The recovery was fueled by speculations and investor optimism that there might still be a potential for further downturns before completing its correction from March’s peak of $73,000.

 Here are other key highlights from last week:

• Avalanche Hoops Game ‘Rumble Kong League’ nets Gatorade deal

• Gaming investments surged 94% in Q1 2024 as market rebounds

• MoonPay expands crypto trading options with PayPal integration

• Polygon silenced critics with groundbreaking Community Grant Program

This week is relatively light on U.S. Economic Data:

• The Consumer Credit report released on Tuesday revealed a significant shortfall, potentially impacting market sentiment regarding consumer spending and debt sustainability.

• Throughout the week, various Fed members delivered speeches that provided a mixed outlook on future monetary policy. Some suggested that interest rates might remain elevated for an extended period, while others indicated the possibility of future rate cuts.

On Thursday and Friday, investors will be closely monitoring the upcoming U.S. jobless claims and consumer sentiment reports. These data points could offer further insights into the domestic economic landscape and consumer confidence.

In other developments this week:

• Apple (AAPL) has continued to capture headlines with its recent product launches and AI initiatives, signaling potential areas for growth. At its event on Tuesday, Apple unveiled several new products, including the Apple Pencil Pro during its iPad launch event. It also introduced an AI-focused iPad Pro and a larger iPad Air with a 13-inch screen. Additionally, Apple announced the development of AI chips for data centers. These innovations are poised to strengthen Apple’s standing in both the consumer and enterprise markets, reflecting its commitment to ongoing innovation.

Earnings Reports:

The Q1 2024 earnings season continues this week with some notable movements:

• Disney (DIS) shares plunged 10% after reporting weaker-than-expected earnings for Q1 2024, although Hulu subscriber numbers exceeded expectations.

• Palantir's (PLTR) stock tumbled 10% as its raised annual forecast fell short of market expectations despite beating Q1 earnings estimates, highlighting the volatility in investor confidence surrounding growth forecasts.

• The energy sector remains volatile, with companies like BP (BP) facing earnings pressures due to fluctuating oil and gas prices.

Other anticipated earnings releases this week are outlined in the chart below.

Key Global Economic Events:

• Reserve Bank of Australia (RBA) interest rate decision

• Bank of England (BoE) interest rate decision

• UK Construction PMI

• UK GDP

• Canadian unemployment rate

• Chinese CPI and PPI

Trading Tip: Mondays in May are historically bearish!

Week 4/28/24 - 5/04/24 Recap

Special Tools and Strategies

Understanding "Sell in May and Go Away"

"Sell in May and go away" is a well-known saying in the stock market world, suggesting that investors should sell their stocks in May and then return to the market in November. This advice is based on historical data showing that, on average, stocks tend to perform better from November through April than they do from May through October.

Historical Performance:

The theory stems from the observation that over many years, the stock market has typically gained about 7% from November to April, compared to just 2% from May to October. This pattern has been noticed not only in large-cap stocks but also in small-cap and global stocks.

Why Consider This Strategy?

The rationale behind the strategy is based on historical market performance, where certain sectors tend to do better in the "best 6 months" (November to April). For example, sectors like consumer discretionary, industrials, materials, and technology usually outperform other parts of the market during these months. In contrast, defensive sectors often do better from May to October.

A Tactical Approach:

Instead of completely exiting the market in May, investors might consider a sector rotation strategy. This involves shifting their investments to sectors that have historically performed better from May to October. For those experiencing positive gains and wishing to secure profits, it may be wise to sell off some investments in May while remaining invested in others, making adjustments as necessary.

Is It Suitable for Everyone?

This strategy is more suited for active investors who are comfortable making frequent adjustments to their portfolios based on market trends. They make it a point to tailor this strategy to their individual financial goals, risk tolerance, and investment horizon.

Recent Trends:

Over the past year, the pattern has continued with the S&P 500 gaining about 5% from May to October 2023, and around 20% from November 2023 to April 2024. However, recent declines and mixed earnings reports, along with ongoing inflation concerns, suggest that each year can vary, and what worked in the past may not always predict future results.

The decision to "sell in May and go away" should not be made lightly or based solely on historical patterns. It's important to consider the current economic environment, personal investment goals, and market conditions. Seasonal trends can provide some guidance, but they should not be the sole factor in investment decisions. Instead, focus on a diversified portfolio that aligns with your long-term financial needs and risk tolerance.

Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.