Why the arrival of May “scares” the Stock Exchange – banks

Why the arrival of May “scares” the Stock Exchange – banks

From the “lips” of central banks hang the stock markets marching towards a “scary” month and under its well-known saying “Sell in May and Walk Away”.

The fragility of the global financial landscape, the now evident failing confidence in the international banking system on the basis of deficient supervision, the fading “American dream” that is evolving into a debt trap, and the mounting uncertainty skyrocketing as geopolitical balances are reshaped and crises follow one another in the blink of an eye, leaving little room for portfolio buying movements, which now put a more “defensive” orientation on the carpet as that the scenario of a “hard landing” scenario for the economy is revised. A global economy that continues to “walk a tightrope” and has no “cushion” or “armour” against a deep recession, even at a time when the risks – mostly interconnected – remain far higher than expected. ‘habit

The persistent high characteristics that o structural inflation (the picture is much more unfavorable in the euro zone, which has not yet shown that it has reached its maximum point, so there will be a subsequent de-escalation) are the “root” of the problem, creating doubts about the next moves and the expected “pivot” of central banks. So either you live and are content – for now – with inflation well above target, or you keep raising interest rates, plunging economies into recession, as a “necessary evil”. “so that there is a substantial de-escalation of high inflationary pressures. In other words, they are asked to choose what they will sacrifice and under what effects.

However, to this problematic basis there is also something to add high and rising double-digit food inflation; which also forms a “perfect storm” for central bankers. The dramatic rise in food prices comes despite the fact that staple food prices have fallen sharply over the past nine months and are now lower than before Russia’s invasion of Ukraine. In addition, while some of the decline in wholesale food prices will be passed on to consumers, the burden relief will ultimately be quite limited as the shift from wholesale to retail, rising costs of energy and labor and the maintenance of corporate profit margins are the main factors preventing the immediate and significant pass-through of lower food prices to consumers.

And all this, with the oil below $80 a barrel. The “black gold” and the factors that threaten to put a new “fire” on its prices, further reduce the room for maneuver of the central banks. In particular, stronger-than-expected growth momentum in the Chinese economy, along with OPEC’s recently announced supply cuts will limit the amount of additional oil reaching the global market, and any additional cartel action could still drive up prices. . , at a time when the risk of unexpected supply chain disruptions looms due to ongoing geopolitical and security concerns.

Of course, while all of this puts increasing pressure on the system and is placed on a larger time base, on the other hand, the Can, on its own, made for a scary month for equities. Historical data supports the basis of its investment strategy “Sell in May and Walk Away”, which finds the markets underperforming during the May-October half, registering a much stronger movement between November and April. From 1945, it appears that the S&P 500 recorded an average cumulative gain of 6.7% over the period between November and April compared to an average gain of around 2% between May and October. Of course, seasonal factors play an important role (as in the “Gathering of Santa Claus”) in boosting this particular investment strategy, however socio-economic conditions, business cycle and market environment they also “illuminated” some possible vulnerabilities in the perception and consolidation of this as a fixed rule. For example, the coronavirus pandemic has also strongly affected the markets during the period from November 2019 to April 2020, which is generally known for a period of high returns. On the contrary, an alternative option is the spin and the differentiation portfolios, but given the agenda of events in the United States and Europe, the room for maneuver in the “hunt” for returns is limited for this month of May.

The international climate affects the stock market

In this context, the Sotck exchange became independent since October 2022 – which marked the beginning of a great upward movement – is now called face and build high “defense zones” to ward off both externally as good as internal “fires”. With just 14 meetings left since the first election on May 21, the domestic market is taking on more cautious characteristics, following the “path” of “profit-taking” and seeking more attractive entry points in a wider “recoil”. The continuity given in terms of the outperformance of the Greek economy, the better picture of the budgetary figures, the shooting distance away from the recovery of the investment grade and also the solid set of results of the listed companies are “papers ” strong for longs, who can easily “burn” in a possible trigger for an international sale. After all, the already open crack left by central banks appears to be widening, as are the banking ‘victims’ falling into it (Silicon Valley Bank, Signature Bank, then First Republic Bank with Credit Suisse collapsing in its absence words” trust” and “reliability”). As rightly said Larry Summers (former US Treasury Secretary) “These things are like wildfires, it’s much easier to prevent them than to contain them once they start to spread.”

Thus, according to the analysis of the waves and the Antonis Kofinako, a certified derivatives investment adviser, head of trader education at Trader24 and lecturer in financial trading at Aegean College, the banking index hit a high of 954.15 points on March 1 and then slid , recording losses of 26.4% over twenty days. The downward movement of the price was marked by five downward waves, creating the promotional wave A. From March 20 to April 21, the corrective wave – bullish B was marked in the form of three sub-waves (A – B – VS). For the completion of the corrective wave B (A – B – C) the theory states that it occurs with the cathodic breakdown of the fourth wave (IV) of subwave C. Moreover, he indicates that with his cathodic decomposition subwave B we will have an indication of the completion of wave B of the greatest Degree. Conversely, if price breaks the fourth sub-wave (4) of wave A on the upside, we will have a “reverse head and shoulders” activation.

His part has the same picture – measure Alpha Bank. The decline recorded in March with a structure of five sub-waves is promotional wave A. Then followed corrective wave B where it ended on April 19 and according to the theory we discussed above, for a continuation at the drop the price should break the subwave B of wave B.

– For a better understanding and learning of wave theory, you can watch the video “Introduction to Elliott Wave Analysis” (https://www.youtube.com/watch?v=zps2pC9k7xc&t=1578s)

Disclaimer: This article is for informational purposes only and does not constitute and cannot be considered an invitation or recommendation to buy, sell or hold shares. The columnists and insider.gr assume no responsibility for any actions by readers or other third parties.

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