Will the April showers give way to May flowers?
April is historically the best month of the year for the S&P 500. Stephen Suttmeier of Bank of America recently ran the numbers and found that the broad index rose 66 percent of the time on an average return of 1.41 percent going back to 1928. After a tough start for the year—the S&P saw its first down quarter since the initial pandemic lockdowns in 2020, falling 4.95 percent—a lot of investors went into April hoping for a reprieve rally.
We now know those hopes were dashed upon the growing realization that the Fed would have to hike interest rates much higher than anticipated earlier this year and that the faster climb increased the risk of a recession. The S&P sold off 8.7 percent on a total return basis. The Nasdaq fell 13 percent and is down 23 percent from its November peak. The quantitative strategy team at Bank of America says it was the 12th worst monthly performance since 1971. Making matters worse, there was nowhere for investors to hide. Long-term Treasuries fell. Gold was down. Corporate bonds declined.
The folks at CNBC released polling data on Tuesday showing the extent of the new pessimism. Fifty-seven percent of the economists, strategists, and fund managers polled say they expect the Fed’s hikes to result in a recession. Fortunately, you will apparently have some time to prepare for the economic slump because those who expect a recession think, on average, that it will get going in August of 2023. Fifty-three percent say it will be moderate while 43 percent believe it will be mild. Roger Ferguson, former Federal Reserve vice chairman, told CNBC’s Becky Quick that a recession is “almost inevitable.”
Federal Reserve Board Chairman Jerome Powell listens during his re-nominations hearing on Capitol Hill on January 11, 2022, in Washington, DC. (Brendan Smialowski/AFP via Getty Images)
Perhaps even more striking than the high level of recession expectations is that the same poll…