The US market adage “Sell in May and Go Away” has once again been nicely underlined by the slide in global markets since Donald Trump’s May 5 tweet that escalated the trade war to full bore.
Aided by fears about global growth, the growing stupidity that is Brexit in the UK, last weekend’s EU parliamentary elections and continuing low inflation, commodities have sunk (even gold) in recent days and Wall Street is starting to look like a battlefield.
US stocks fell on Wednesday, with the S&P 500 and Nasdaq as worried investors pushed into the safe havens of government bonds. Each of the three major US indexes suffered their fourth fall in five sessions on Wednesday.
The Dow fell 221.36 points, or 0.87% on Wednesday, to 25,126.41, the S&P 500 lost 19.37 points, or 0.7%, to 2,783.02 and the Nasdaq shed 60.04 points, or 0.8% to 7,547.31.
The Nasdaq Composite Index stands down 7.6% from its record on May 3 (the Friday before Trump’s May 5 tweet which boosted tariffs on $US200 billion of Chinese imports). The S&P 500 has fallen 5.5% and the Dow has dropped 5.2%.
The Dow, in fact, closed at its lowest level since February 11, while the S&P and Nasdaq ended the session at their lowest closing levels in nearly three months.
In Europe, the Stoxx 600 index has fallen 10.5% since its April 15 high and down 5.1% since May 3.
The uncertainties have seen investors dump equities and seek safety in government debt, which has led to an inversion of the yield curve between 3-month bills and 10-year Treasury notes, a possible precursor to a recession. Benchmark US 10-year note yields touched a low of 2.21%, the lowest since September 2017.
The Australian 10-year bond yield fell to 1.48% on Wednesday, a record low after Federal Treasury sold $3 billion of 10-year bonds at 1.50%.
The market is telling us there will be a rate cut next Tuesday and another soon after.