Summer is coming, and all too often that spells a slowdown for the stock market, as traders grow drowsy and dream of beaches.
Many recall the old advice to “Sell in May and go away …” and wonder whether there’s truth in it.
April was the cruellest month, with the S&P 500 falling 4.1 per cent. With the long-awaited first US interest rate cut postponed to the autumn, or possibly 2025, investors could be forgiven for having sunshine on their minds, rather than stocks and shares.
Those feeling guilty about absenting themselves can take solace from summers past, says Tony Hallside, chief executive of Dubai-based prime brokerage firm STP Partners.
“Historically, the S&P 500 has grown just 2 per cent for the six months from May through October, compared with a 7 per cent gain from November through April.”
While this supports the “Sell in May” thesis, as ever with investing, past performance is no guide to the future, Mr Hallside warns.
Not every summer is a washout. So, what about this one?
Mr Hallside is wary as the spring rally has left stocks looking overvalued.
“Investors are right to be cautious, due to the potential for a correction,” he says.
Selling in May – or any month – is never a good idea, unless you need the money. It's better to sit tight, let the dividends roll in, and keep an eye open for opportunities.
“Investors should consider adopting a defensive approach, taking advantage of the recent pullback to buy quality stocks at lower prices,” Mr Hallside says.
Fears that 2024 would be a cruel summer for investors have been fuelled by US consumer price inflation, which climbed from 3.2 per cent in February to 3.5 per cent in March, instead of falling as hoped.
Markets had hoped for six interest rate cuts across 2024, which would cut borrowing costs and increase growth.
With inflation proving hot and sticky, they now expect two at best, with the first delayed until September. We may get none at all.
Marc Pussard, head of risk at APM Capital, says that given today’s heavy weather, even buying the dip may be risky.
The S&P 500 is up 6 per cent this year, despite April’s dip, which he suggests looks “frothy”, given that the US economy grew a disappointing 1.6 per cent in the first quarter.
A recession cannot be ruled out, either. The US yield curve has been signalling a slump since July 2022.
“If that continues, it would only be a matter of time before equity markets reflect this sentiment,” Mr Pussard says.
He notes that US Federal Reserve chair Jerome Powell has said that its decisions will be data-dependent.
“Maybe this isn’t the time to buy the dip, but rather sit on your hands and wait for more data,” Mr Pussard says.
Or sit on the beach, maybe? It’s tempting.
Yet, there was a flurry of excitement when April's US labour market report was published last week and turned out to be softer than expected.
“With fewer job gains, moderate earnings growth and slightly higher unemployment, the market is seemingly finally cooling,” says Julius Baer chief economist David Kohl.
“Lower inflation risks increase the probability of more rate cuts in 2024.”
Just not in the summer. “We continue to expect the Fed to start cutting at its September meeting,” Mr Kohl adds.
Mohamed Hashad, chief market strategist at Noor Capital, is not expecting a cool, quiet summer.
Not with inflation high, trading volumes down and inflation falling faster in Britain and Europe than in the US.
Monetary policies are starting to diverge. “Inflation is declining in the EU and the UK, but interest rate volatility exists in Japan,” he says.
Investors should consider adopting a defensive approach, taking advantage of the recent pullback to buy quality stocks at lower prices
Tony Hallside,
chief executive, STP Partners
The UK was hit harder by the inflation shock than most, because of its reliance on imported oil and gas. Now price growth seems to be slowing faster than elsewhere. April’s data could see inflation falling back to the Bank of England’s 2 per cent target.
If that happens, the central bank will come under intense pressure to slash interest rates even if the Fed doesn't.
The UK economy desperately needs a lift, with the Organisation for Economic Co-operation and Development predicting it will be the slowest growing in the G7 over the next two years.
While Wall Street fell in April, London's FTSE 100 broke the 8,000 barrier for only the second time ever, as it hit a string of all-time highs.
UK shares remain cheap after Brexit, and international investors have taken note.
Eurozone inflation fell to just 2.4 per cent in March, which means the European Central Bank could have a decision to make, too.
Yet the US still leads the way and it’s facing a bumpy summer, says Vijay Valecha, chief investment officer at Century Financial.
US tech has driven the market rally, but Nvidia and Tesla look pricey.
“The S&P 500 is trading at about 20 times earnings forecasts, above the historical average. Strong earnings alone may not sustain the rally, and companies will need to consistently surpass estimates to justify higher stock prices,” he adds.
Investors are becoming more demanding and seeking positive surprises. They may not get them, Mr Valecha says. “Stagflation is a real risk.”
With US interest rates stuck at a 22-year high, borrowers are coming under pressure, increasing the risk of company defaults.
“In a higher-for-longer interest rate environment, firms are depleting their cash reserves as earnings moderate and debt servicing costs rise,” Mr Valecha says.
The International Monetary Fund highlighted the growing number of small and medium-sized companies whose cash reserves are running low, he adds.
“Defaults are also increasing in the leveraged loan market, where financially weaker firms borrow, yet most investors have disregarded these concerns.”
Mr Valecha suggests that investors should “go light on their equity investments”, and even consider seeking safety in US government bonds.
Many will read that and wonder whether they should follow their instincts and hit the beach after all.
The excitement may arrive in September when we get that first-rate cut.
It’s tempting but investors shouldn’t completely tune out. Markets called spring wrong. Summer might be full of surprises, too.
Should late investors consider cryptocurrencies?
Wealth managers recommend late investors to have a balanced portfolio that typically includes traditional assets such as cash, government and corporate bonds, equities, commodities and commercial property.
They do not usually recommend investing in Bitcoin or other cryptocurrencies due to the risk and volatility associated with them.
“It has produced eye-watering returns for some, whereas others have lost substantially as this has all depended purely on timing and when the buy-in was. If someone still has about 20 to 25 years until retirement, there isn’t any need to take such risks,” Rupert Connor of Abacus Financial Consultant says.
He adds that if a person is interested in owning a business or growing a property portfolio to increase their retirement income, this can be encouraged provided they keep in mind the overall risk profile of these assets.
The specs
Engine: 4.0-litre, twin-turbocharged V8
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Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
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UAE currency: the story behind the money in your pockets
Company Profile
Company name: OneOrder
Started: October 2021
Founders: Tamer Amer and Karim Maurice
Based: Cairo, Egypt
Industry: technology, logistics
Investors: A15 and self-funded
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Premier League results
Saturday
Crystal Palace 1 Brighton & Hove Albion 2
Cardiff City 2 West Ham United 0
Huddersfield Town 0 Bournemouth 2
Leicester City 3 Fulham 1
Newcastle United 3 Everton 2
Southampton 2 Tottenham Hotspur 1
Manchester City 3 Watford 1
Sunday
Liverpool 4 Burnley 2
Chelsea 1 Wolverhampton Wanderers 1
Arsenal 2 Manchester United 0
The specs
Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Top tips
Create and maintain a strong bond between yourself and your child, through sensitivity, responsiveness, touch, talk and play. “The bond you have with your kids is the blueprint for the relationships they will have later on in life,” says Dr Sarah Rasmi, a psychologist.
Set a good example. Practise what you preach, so if you want to raise kind children, they need to see you being kind and hear you explaining to them what kindness is. So, “narrate your behaviour”.
Praise the positive rather than focusing on the negative. Catch them when they’re being good and acknowledge it.
Show empathy towards your child’s needs as well as your own. Take care of yourself so that you can be calm, loving and respectful, rather than angry and frustrated.
Be open to communication, goal-setting and problem-solving, says Dr Thoraiya Kanafani. “It is important to recognise that there is a fine line between positive parenting and becoming parents who overanalyse their children and provide more emotional context than what is in the child’s emotional development to understand.”
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Company profile
Company name: Dharma
Date started: 2018
Founders: Charaf El Mansouri, Nisma Benani, Leah Howe
Based: Abu Dhabi
Sector: TravelTech
Funding stage: Pre-series A
Investors: Convivialite Ventures, BY Partners, Shorooq Partners, L& Ventures, Flat6Labs
Scoreline:
Everton 4
Richarlison 13'), Sigurdsson 28', Digne 56', Walcott 64'
Manchester United 0
Man of the match: Gylfi Sigurdsson (Everton)
BRIEF SCORES
England 228-7, 50 overs
N Sciver 51; J Goswami 3-23
India 219, 48.4 overs
P Raut 86, H Kaur 51; A Shrubsole 6-46
England won by nine runs
The%20stats%20and%20facts
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'Gold'
Director:Anthony Hayes
Stars:Zaf Efron, Anthony Hayes
Rating:3/5
If you go…
Emirates launched a new daily service to Mexico City this week, flying via Barcelona from Dh3,995.
Emirati citizens are among 67 nationalities who do not require a visa to Mexico. Entry is granted on arrival for stays of up to 180 days.
UAE currency: the story behind the money in your pockets
'Panga'
Directed by Ashwiny Iyer Tiwari
Starring Kangana Ranaut, Richa Chadha, Jassie Gill, Yagya Bhasin, Neena Gupta
Rating: 3.5/5
Evacuations to France hit by controversy
- Over 500 Gazans have been evacuated to France since November 2023
- Evacuations were paused after a student already in France posted anti-Semitic content and was subsequently expelled to Qatar
- The Foreign Ministry launched a review to determine how authorities failed to detect the posts before her entry
- Artists and researchers fall under a programme called Pause that began in 2017
- It has benefited more than 700 people from 44 countries, including Syria, Turkey, Iran, and Sudan
- Since the start of the Gaza war, it has also included 45 Gazan beneficiaries
- Unlike students, they are allowed to bring their families to France
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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CHATGPT%20ENTERPRISE%20FEATURES
%3Cp%3E%E2%80%A2%20Enterprise-grade%20security%20and%20privacy%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Unlimited%20higher-speed%20GPT-4%20access%20with%20no%20caps%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Longer%20context%20windows%20for%20processing%20longer%20inputs%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Advanced%20data%20analysis%20capabilities%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Customisation%20options%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Shareable%20chat%20templates%20that%20companies%20can%20use%20to%20collaborate%20and%20build%20common%20workflows%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Analytics%20dashboard%20for%20usage%20insights%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Free%20credits%20to%20use%20OpenAI%20APIs%20to%20extend%20OpenAI%20into%20a%20fully-custom%20solution%20for%20enterprises%3C%2Fp%3E%0A
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
Banned items
Dubai Police has also issued a list of banned items at the ground on Sunday. These include:
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Political flags or banners
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Bikes, skateboards or scooters
How to get exposure to gold
Although you can buy gold easily on the Dubai markets, the problem with buying physical bars, coins or jewellery is that you then have storage, security and insurance issues.
A far easier option is to invest in a low-cost exchange traded fund (ETF) that invests in the precious metal instead, for example, ETFS Physical Gold (PHAU) and iShares Physical Gold (SGLN) both track physical gold. The VanEck Vectors Gold Miners ETF invests directly in mining companies.
Alternatively, BlackRock Gold & General seeks to achieve long-term capital growth primarily through an actively managed portfolio of gold mining, commodity and precious-metal related shares. Its largest portfolio holdings include gold miners Newcrest Mining, Barrick Gold Corp, Agnico Eagle Mines and the NewMont Goldcorp.
Brave investors could take on the added risk of buying individual gold mining stocks, many of which have performed wonderfully well lately.
London-listed Centamin is up more than 70 per cent in just three months, although in a sign of its volatility, it is down 5 per cent on two years ago. Trans-Siberian Gold, listed on London's alternative investment market (AIM) for small stocks, has seen its share price almost quadruple from 34p to 124p over the same period, but do not assume this kind of runaway growth can continue for long
However, buying individual equities like these is highly risky, as their share prices can crash just as quickly, which isn't what what you want from a supposedly safe haven.
MATCH INFO
Uefa Champions League semi-final, first leg
Tottenham v Ajax, Tuesday, 11pm (UAE).
Second leg
Ajax v Tottenham, Wednesday, May 8, 11pm
Games on BeIN Sports
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
