Schwab Market Perspective: Corporate Caution ... Global Recession?

These two effects are offsetting on the yield spread leaving us to conclude that the yield curve is likely to remain a useful (though not perfect) indicator of recession. We believe growth is likely to remain below average, but avoid a global recession and accompanying prolonged bear market over the coming 12 months. That suggests long-term investors should ignore the old adage to “sell in May” and instead stick with their diversified asset allocations and rebalance as needed.

So what?

Uncertainty among investors and companies has resulted in equities failing to push to new highs…for now.  We remain fairly confident that stocks will reach new records, but patience in the near term is required. And selling in May doesn’t appear to be a great strategy for long-term investors as global yield curves are indicating low odds of a global recession. Perhaps hold in May is more apt. Bouts of volatility are likely to persist in light of uncertainty over Fed policy, the upcoming election, and global growth concerns.