If there was ever a time to “sell in May,” it was this year. Heading into today, the S&P 500 was already down over 4% on the month with three trading days left to go, and with today’s early weakness, we’re now on pace for a 5% decline for the month. Treasuries, meanwhile, have been surging. According to the BofA/Merrill Lynch index of long-term notes (10+ year maturities), US Treasuries were up over 4% MTD heading into the last three trading days of the month. While a 4% monthly decline for equities isn’t that rare (40 prior occurrences since 1990), when it’s accompanied by a rally in US Treasuries of the magnitude we have seen this month, it’s a lot less common. Since 1990, there have only been ten other months where the S&P 500 was down more than 4% heading into the final three trading days of the month while at the same time long-term US Treasuries were up over 4%.
In the table below, we have highlighted each of those ten prior periods along with how the S&P 500 has performed over the final three trading days of the month. The results are quite dramatic, suggesting we could be in store for a big move to close out the month of May.
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