FX Evolution: This Doesn’t Happen Everyday
Year-to-date, the stock market is up over 10%. That’s above average, given its historic average annual return of 8.8%. Typically, in years when the market is up more than 10% by the end of May, it will continue to rally further.
That suggests that investors may not want to get too cautious. The market slowdown over the past few weeks may not be the sign of a big turn in the market. Rather, it could be a pause before a move higher.
About 70% of the time, markets performing this way will rise in June. And they have about an 85% chance of being higher for the rest of the year. Those are good odds for investors to follow.
In the meantime, market volatility is low. That’s usually a sign that the market doesn’t see any potential big dangers on the horizon. And that markets should generally drift higher.
Many big rallies over the past 40 years have occurred under similar conditions.
Investors in this market could do best by looking for sectors that are starting to trend higher. And avoid market sectors that have run strong, but are now starting to underperform.
This market rotation could create some market-beating opportunities as stocks remain likely to trend higher in the months ahead.