In May, the S&P 500 rose by 4.8%, marking its best month since February. Meanwhile, the technology-heavy Nasdaq climbed 6.9%, achieving its largest monthly gain since November. The Dow also saw an increase of 2.3%, its strongest monthly performance since December. The saying “Sell in May” hasn’t held true this year. So far, it simply hasn’t.
However, speculative stock mania seems to be making a comeback. One indication is the growing popularity of penny stock trading, with the volume of U.S. trading in shares worth less than $1 steadily increasing. For example, seven out of the top ten most-traded U.S. stocks in May were penny stocks, none of which are profitable.
Another sign is the resurgence of meme stock mania. Stocks like GameStop (GME), AMC, and the EV startup Faraday Future, founded by Jia Yueting, saw significant surges. Faraday Future, for instance, soared nearly 10,000% from its recent lows during this mania. However, as with most meme stocks, their earnings reports brought them back to reality, similar to what happened with GME and AMC. It seems no one remembers the meme stock mania burst just a couple of years ago (by the time I am writing this. the meme stocks are on fire, the NYSE is experiencing a technical glitch that resulted in BRK A dropping 99% 😱 ).
What a crazy world! Both the skyrocketing trading activities in penny stocks and the returning meme stock mania indicate that the rally which started in October 2022 might be moving into the late stage of this cycle.
Technical Analysis
Technically, the market touched the top line of this uptrend channel, which was last tested on March 28, 2024. So far, the uptrend remains valid as the market closed just above its 50-day moving average (50MA) on the last day of May, as well as the uptrend line. However, the Moving Average Convergence Divergence (MACD) indicator has shown a “death cross” – a bearish signal where the MACD line crosses below the signal line. We will need to closely monitor the market movements to see which side the market will break first, as this will indicate the future trend.
Portfolio Performance
In May, thanks to the robust gains of NVIDIA (#NVDA), our long-term investment portfolio rebounded with a return of 16.2%, bringing the cumulative gain since May 2020 to 137.06%. Our dynamic investment portfolio gained about 12.08%, leading to an overall return of 68.05% since May 2020. (For detailed insights, please refer to our latest performance report). Our closed note portfolio contributed an average return of 15.63% since April 19, 2021. During this period, the market reached multiple all-time highs (ATHs). A principal-protected note has proven to be an effective tool in such conditions.
Since 1952, the S&P 500 has experienced an average gain of 7% during presidential election years. However, economic indicators such as growth rates, interest rates, inflation, and corporate earnings have a more significant impact on market returns than election outcomes. As James Carville, Bill Clinton’s political advisor, famously said, “It’s the economy, stupid.”