U.S. equities held near record highs as investors weighing the old adage “Sell in May and go away?” debated whether this year should follow seasonal history. The S&P 500 and Nasdaq Composite have drifted to all-time highs even as Middle East tensions persist, underscoring a market that remains resilient on fundamentals and technicals while breadth improves beyond the headline averages.
Market participants cited a mix of factors supporting a constructive tilt, including a technical setup that remains favorable by one widely watched measure, and a softer near-term growth backdrop that hasn’t derailed equities yet. However, the balance of risks, notably the Iran situation and evolving inflationary pressures, leaves an uneven path ahead. “Is this the year to not sell in May and go away?” asked Jeffrey Hirsch, editor in chief of the Stock Trader’s Almanac. “Let’s track and see what the market does.”
Key takeaways
- Price move: U.S. equities held at or near all-time highs, extending a period of resilience despite geopolitical and economic headwinds.
- Catalyst: A debate around the traditional May-October seasonality for stocks, with some strategists arguing for continued exposure and others urging caution depending on the MACD trajectory and macro data.
- Key implication: The market’s reaction could hinge on the path of energy prices, consumer demand, and the Iran situation, with investors weighing a potential shift into short-duration cash and bond exposure if signals turn negative.
What drove the move
Equity benchmarks have managed to sustain highs even as headlines remain dynamic. The narrative increasingly centers on breadth in leadership rather than a narrow rally in a few big names, a sign of improving market participation beneath the surface. The length and steadiness of the advance have raised questions about whether a traditional seasonal weakness will materialize this year, or if a new pattern is taking shape.
From a technical vantage point, momentum remains a focal point for traders. The MACD, which tracks the relationship between shorter and longer moving averages, is cited by Hirsch as signaling ongoing upside momentum. Even so, strategists caution that a negative shift in the MACD could alter risk expectations, reinforcing the argument to recalibrate risk exposure during the upcoming period.
On the macro front, the Atlanta Federal Reserve’s latest GDPNow estimate pointed to a first-quarter U.S. growth rate of 1.2%, a softer print relative to earlier projections that had exceeded 3%. While not a collapse, the deceleration contributes to a more cautious stance among investors who must weigh growth momentum against earnings resilience and inflation dynamics.
Beyond growth, energy and consumer dynamics are in sharper focus. CNBC’s own survey noted that American households are trimming back on discretionary spending as energy costs rise, with gasoline prices climbing above a notable threshold. The implication for equities is twofold: pockets of consumer-facing sectors could slow, while energy-intensive or inflation-sensitive industries may face renewed scrutiny on margins and pricing power.
Market watchers also weigh global geopolitical developments. A potential resolution or easing of tensions around Iran could influence risk appetite by reducing uncertainty around energy supply flows and broader demand conditions. In turn, such a development could bolster confidence in equities during a period that historically tests returns for stocks tied to domestic demand and global trade flows.
Against this backdrop, some investors have started to reposition. Hirsch said he has shifted toward shorter-term cash and bond instruments, highlighting the iShares 0-3 Month Treasury Bond ETF (SGOV), the iShares 0-1 Year Treasury Bond ETF (SHV), and the iShares Core U.S. Aggregate Bond ETF (AGG) as part of a defensive tilt. Utilities, meanwhile, emerge as a preferred sector in a balanced stance rather than a full retreat from equities. “Not necessarily go away,” he said, “but reposition.”
Strategists at Bank of America Securities also weigh in on the seasonal debate. Paul Ciana, the firm’s chief market technician, contends that this year could debunk the Sell in May theory. Ciana cited an analysis of six-, three-, and one-month averages that suggests a pattern of buying in May and selling in July/August before a potential weakness in August through October. If his interpretation holds, the traditional seasonal bias may be less relevant in a year dominated by macro resilience and shifting tactical bets.
Market reaction
Although the macro backdrop remains uncertain, equity momentum persisted, with major indices holding near highs and traders parsing data for clues on the next leg. The market’s response to shifting macro signals, such as inflation readings, growth estimates, and geopolitical headlines, continues to feature a bifurcated dynamic: defensive positioning against downside risk alongside selective bets on cyclical reacceleration if policy and earnings stay constructive.
Liquidity patterns and sector leadership have drawn renewed attention. While some participants advocate tactical duration exposure to dampen volatility, others see room for continued equity upside as long as earnings and consumer demand maintain a constructive trajectory. The debate points to a broader theme in today’s markets: the interplay between macro risk, policy expectations, and the performance of cyclical versus defensive sectors.
What analysts are saying
In addition to Hirsch’s market commentary, the broader narrative features diverse views on seasonality and risk. The historical frame underscores that the May-October window has, on average, produced weaker returns compared with the following six months, a pattern more pronounced during midterm election years. CFRA’s Sam Stovall highlighted that the S&P 500 has historically risen over roughly the next six months after a May-October lull, a dynamic investors will be watching for this year. The data points cited by Stovall are part of a longer historical context that informs today’s repositioning discussions.
Meanwhile, sentiment around inflation, rate expectations, and the pace of policy normalization continues to influence trading. The market remains sensitive to new data on inflation and growth, as well as to headlines related to the Middle East and energy markets. The evolving macro environment lends itself to a cautious but opportunistic approach, with some investors favoring liquidity and defensive assets while staying alert to signs of a pickup in risk appetite if conditions improve.
Bigger picture
Strategists frame the current environment as a test of the resilience that has characterized markets through a range of global shocks. The interplay between macro momentum and geopolitical risk will likely dictate the path for equities in the near term. If the Iran situation evolves toward a broader agreement or a more stable outcome, investors could interpret that as a signal of favorable risk conditions powering gains into the busy spring and summer period. Conversely, stalled negotiations or renewed conflict would underscore the importance of asset allocation discipline and the potential appeal of duration protection.
Beyond geopolitics, the broader macro narrative remains tethered to inflation dynamics, wage growth, and the potential for further shifts in rate expectations. Markets will be listening closely to upcoming data and central-bank communications to gauge how much further policy adjustments are priced in and how that recalibrates equity risk premia across sectors.
What to watch next remains clear: forthcoming earnings reports, fresh inflation readings, and any tangible developments in the Iran negotiations or regional stability. Investors will be assessing whether the market can sustain its current momentum or whether seasonal patterns will reassert themselves as the year progresses.
Closing observations suggest a cautious but watchful stance. As Hirsch notes, the MACD and other momentum signals will be key in the coming weeks, while Ciana’s framework implies a potential shift toward a more nuanced seasonal approach. The path forward will hinge on how expectations for growth, inflation, and geopolitical risk converge with real-time market dynamics, and how investors balance the allure of potentially higher returns against the safety of liquidity and duration protection.
In short, the market remains in a posture of vigilant optimism. If volatility abates and earnings trends hold, equities could extend their resilience into the May-June period. If energy costs push higher or geopolitical tensions intensify, a measured consolidation or rotation into defensive assets could take hold as investors reassess underlying risk and reward.
