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

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%.