Here’s what history indicates is in store for U.S. and global stocks in May
May is no April for stock markets. After surviving a scare from the banking sector in March, stocks posted gains in April and fit the historical pattern seen over half a century or more. On the other hand, May hasn’t been such a sure performer historically, according to CNBC Pro’s analysis of S & P 500 index data on FactSet dating back to 1928. On average, stocks have risen in May 56 out of the 95 years, or about 60% of the time. The market jumps by 3.2% on average when it does go up. The losses are more severe at 4.7% when there are negative returns in May. But the picture for May is usually slightly worse if markets posted negative returns in the prior year and then rebounded in the first quarter of the following year. In such a scenario, stocks tend to rise 57% of the time and return 2.7% on average when they go up. Conversely, the downside scenario is bleak, with a 6.25% loss on average when the market declines. Past performance does not necessarily predict future results, however. The chart below shows month-on-month performance of the S & P 500 over the past 20 years. For the second quarter as a whole, the direction of travel for the S & P 500 was less clear . Still, on a yearly basis, investors may find comfort in knowing that stock markets generally deliver positive returns after a negative annual performance. Global stocks The MSCI World Index , which captures over 1,500 large and mid-cap stocks across 23 developed countries, has historically underperformed its large U.S. peer in May. The index has risen 55% of the time over the month since 1970, the first year for which market data exists. However, the index has been less volatile compared to the S & P 500. When it does go up in May, stocks rise by 2.3%. On average, the market declines by 2.9% when they do fall. Following a negative year of returns bouncing off a positive first quarter, the MSCI World index stocks have performed markedly worse by rising only 37.5% of the time in May — by 1.9% on average. However, when there was a sell-off in May after a positive first quarter, the index fell by 3.76% on average. The MSCI World’s lower volatility statistic was also previously observed in its second quarter and full-year performances.
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