May 18th Weekly Market Update

This week we pay tribute to David Letterman’s last Late Show on May 20, 2015, with our own top 10 list: the top 10 keys for stocks. Mr. Letterman has had quite a long and successful run as a late night TV host on two networks. Late
Night with David Letterman debuted on NBC on February 1, 1982 (when the S&P 500 closed at a mere 117.78), followed by Late Show with David Letterman that debuted on August 30, 1993 (S&P 500 closed at 461.90). With earnings season largely behind us, here is our list of 10 keys for the stock market over the next several months.


10) Greece. After making its latest payment to the International Monetary Fund (IMF), the coast may be clear for a few weeks in terms of the potential for Greece’s financial troubles to cause a hiccup in the global financial markets. The next big payment, due to creditors in mid-June 2015, has the potential to drive increased global stock and bond market volatility, due to the uncertainty created by a possible default and departure from the Eurozone (though not our expectation). One member potentially leaving the Eurozone may spark speculation of other possible departures.

9) Seasonality. We are not big believers in the “sell in May” adage, but May has historically marked the end of a favorable period for the S&P 500, based on many decades of historical return data. Strong seasonal patterns can also be observed for certain segments of the market, such as consumer discretionary, which has historically performed very
well during the first five months of the year before falling off beginning in June, and energy, which has historically benefited from strong gasoline demand ahead of the start of the summer driving season.

8) Oil prices. We believe oil is another key for the broad stock market, at least in the near term, although lower prices bring both positives and negatives. Negatives include lower energy sector profits, reduced demand for crude oil transport for rails and trucks, and reduced capital spending, which is a drag on industrials sector profits. But
lower fuel costs put more cash in consumers’ pockets and reduce transportation costs for businesses. We believe stable or gradually rising oil prices — our  expectation — may be the best scenario.

For the full article: Top 10 Keys for Stocks