• Since 1980 when the stock market has fallen in the first four months of the year (i.e. through April), it has continued to fall through September 40% of the time. The average return from May through September during those years was a dismal -1.5%.
• Polls continue to show that Americans are less optimistic about the future of the economy. Yet, this pessimism has not stopped consumers from spending money. Compared to a year ago, first-quarter spending on Citi, Chase, and Wells Fargo credit cards all rose 23% or more. Clearly consumers’ willingness to buy services/goods rather than rising consumer prices, which increased 8.5% year-over-year, accounted for most of the growth.
• Investors have been flocking into more defensive stocks in the healthcare, utilities, and consumer staples sectors. This is largely because during the past two decades these three sectors have outperformed the S&P500 by 15%-20% during periods of economic uncertainty. Unfortunately, all this buying has also driven up these sectors’ valuations with the utilities sector hitting its highest valuation on record (21.9x forward earnings).
• ESG (Environmental, Social, and Governance) investing has become popular over the past decade. Yet, as of the end of the first quarter ESG funds had fallen nearly 7% compared to just 5.6% for all large-cap US funds. Reason? ESG funds both underweight oil (and gas), which is up around 40% this year, and have roughly 25% of their assets invested in the technology sector, which has been hit hard with rising interest rates.