May 26, 2026 Reflections: Time To Lighten Up Exposures?

2026-05-28 17:05:00 ET

The current economic doldrums have most investors concerned about a potential market downturn. The bottom line concern many economists and consultants have expressed lately is stagflation, the dreaded combination of flat economic growth with inflation that gets higher and higher indefinitely. We may be approaching a time where that concern becomes so widely held that it gets reflected by the market. That worry is only compounded by the fact that we are now in the six-month period of the calendar year, typically marked by underperformance relative to the full year. The six months from October 1 through April 30 between 1926 and 2025 have averaged about 500 basis points more, reflecting a difference of about 7.3% to 2.3%, than the May - October period. This does not mean that investors should sell their S&P 500 stocks in May. In terms of frequency, the S&P 500 Index posts positive returns for the May-October period about two-thirds of the time but also underperforms the year’s S&P 500 return almost as frequently. Such trends are not repeated every year but certainly do nothing to dispel fears that the new economic realities for the USA will translate into a six-month-or-more market downturn....

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