The stock market’s woes may not be over yet. Recent reports of rising inflation have stoked concerns that interest rates will remain higher for longer, with stocks coming off their first losing month since October. The market’s plunge has stalled the artificial intelligence-driven gains in the first half of the year. The S&P 500 is down more than 3% this month, but is still up more than 6% for the year. But many investors worry the stock market will need to rise further before it finds a durable bottom. Even after the latest pullback, stocks still look overvalued, they said, noting that stocks face troubling headwinds. Inflation remains sticky. Treasury yields are rising. Geopolitical risks abound. Moreover, the momentum indicator monitored by market technicians is issuing a sell signal. Chief investment strategist Mark Luschini said: “Typically, when you see a 5% drawdown, it rarely stops there. Typically, it starts at 5% and it turns into 8% to 11% “So we expect more volatility and downside. Even so, the investment strategist said he is more optimistic about stocks for the rest of the year, saying a retest of the 4,800 level by the S&P 500 could signal a buying opportunity. He recommended investors increase exposure to financials, Investing in Cyclical Stocks like Industrials and Utilities “Sell in May and Walk Away” May is known as a historically weak month for the stock market. Investors who adhere to a “sell in May and leave” strategy sell off their holdings at the beginning of the month and return in the fall to take advantage of the stock’s seasonally strong calendar period. In fact, the Stock Trader’s Almanac shows that May is the start of the market’s worst six months of seasonality, with the Dow Jones Industrial Average rising an average of 0.8% from May to October. On the other hand, the best six months of the year, from November to April, saw average gains of 7.3%. Jeff Hirsch, editor-in-chief of Stock Trader’s Almanac, said he had exited positions in the Dow Jones and S&P 500 earlier this month, citing the emergence of a moving average convergence technical indicator. Sell signal/divergence, or MACD, earlier this month. However, he said he remains optimistic about the stock market for the rest of the year and advised investors to take time to evaluate their portfolios. “It’s not selling and walking away. It’s not doing nothing. It’s reevaluating your portfolio. Get rid of the losers, tighten your stops, limit your purchases and be more cautious,” Hirsch said. .SPX 1M mountain S & P 500 He noted that he added investments in two bond ETFs: the iShares 0-3 Month Treasury Bond ETF (SGOV) and the iShares Short-Term Treasury Bond ETF (SHV). Others, however, take a more positive view of the stock market. Carson Group’s Ryan Detrick noted that stocks have actually been rising in May in nine of the past 10 years. He added that stocks tend to do well in the summer, especially in election years. “The fact that we’ve had a good year over this period and it’s an election year suggests to us that we don’t expect significant weakness over the next six months,” he said.
