Stock sellers got burned in May but volatility set to return in June

June has been a good month to do something besides invest in the stock market

Jun 1, 2016 @ 11:49 am

By John Waggoner

If you sold in May, you went away too early.

The Standard and Poor's 500 stock index rolled to a 1.53% gain in May, and 1.80% with dividends reinvested. For the three months ended May, the blue-chip index is up 8.53%, or 9.12% with dividends.

Information technology was May's leader, gaining 5.28%, according to Howard Siverblatt, senior index analysts for S&P Dow Jones Indices. Not surprisingly, growth-oriented funds led in May. Large-cap growth funds, for example, gained an average 2.24%, while tech funds gained 4.80%, according to Morningstar.

Energy was the biggest loser, down 1.17%, even though oil passed the $50 per barrel mark for the first time since November. Energy funds fell 1.31%.

Commodities added a dose of misery to your portfolio: Managed futures funds fell 1.09%, natural resources funds fell 2.79%, and gold funds plunged 10.75%.

June has been a good month to do something besides invest in the stock market. Historically, the S&P 500 posts a gain 56.8% of the time, with the average gain 3.24%, according to Mr. Silverblatt. When it's down, however, it averages a 4.63% loss.

Somewhat ominously, investors enter June with increased warnings about high stock valuations, despite the fact that the S&P 500 hasn't hit a new high in 12 months. BlackRock's Richard Turnill downgraded global stocks Tuesday, warning that U.S. stock valuations were elevated and that the chance of a Federal Reserve interest-rate increase “appears more likely.” The sum of all BlackRock's fears:

“U.S. equity valuations sit around the 70th percentile of their long-term historical range, according to our calculations. And stocks overall appear more vulnerable to short-term risks. These include a Fed that increases rates too aggressively, a Brexit, a worsening European immigration crisis and a slowdown in global growth. We also see less upside to China's growth expectations after a recent uptick in activity, and oil prices have rebounded a long way and now reflect improved fundamentals.”

Mr. Turnill isn't alone in his pessimism. In recent months, market luminaries such as Rob Arnott of Research Affiliates and Jack Bogle, founder of Vanguard, has been warning about subpar returns from stocks. Of course, long-term returns have already been sub-par: The S&P 500 has clocked an average annual total return of 5.56% gain the past 15 years, and 7.78% the past 20 years. The average annual return since 1926 has been 10.09%.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

When can advisers expect an SEC fiduciary rule proposal and other regs this year?

Managing editor Christina Nelson and senior reporter Mark Schoeff Jr. discuss regulations of consequence to financial advisers in 2018, and their likely timing.

Recommended Video

Path to growth

Latest news & opinion

Cutting through the red tape of adviser regulation is tricky

Don't expect a simple rollback of rules under the Trump administration in 2018 — instead, regulators are on pace to bolster financial adviser oversight.

Bond investors have more to worry about than a government shutdown

Inflation worries, international rates pushing Treasuries yields higher.

State measures to prevent elder financial abuse gaining steam

A growing number of states are looking to pass rules preventing exploitation of seniors.

Morgan Stanley reports a loss of advisers after exiting the protocol for broker recruiting

The firm said it lost 47 brokers in the fourth quarter, the most in any quarter of 2017.

Morgan Stanley's wealth management fees climb to all-time high

Improvement reflect firm's shift of more clients into fee-based accounts priced on asset levels, which boosts results as markets rise.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print