Market Insights: Historical Turnarounds and May Seasonality

Milestone Wealth Management Ltd. - May 02, 2025

Macroeconomic and Market Developments: 

  • North American markets were up this week. In Canada, the S&P/TSX Composite Index rose 1.30%. In the U.S., the Dow Jones Industrial Average rallied 3.00% and the S&P 500 Index was up 2.92%. This was the ninth straight positive day for the S&P 500, the longest such streak in over 20 years.
  • The Canadian dollar rose slightly, closing at 72.40 cents vs 72.15 USD cents last week. 
  • Oil prices fell again. U.S. West Texas crude closed at US$58.55 vs US$63.23 last week. 
  • The price of gold dropped again, closing at US$3,241 vs US$3,317 last week. 
  • “Core” GDP – which includes consumer spending, business investment, and housing – rose at a relatively healthy 3.0% annual rate in Q1, signaling some underlying strength even as the headline real GDP declined 0.3%, weighed down by a historic spike in imports ahead of tariffs. Inflation stayed elevated, with the GDP price index rising at a 3.7% annualized rate, keeping pressure on the Fed’s timing for any rate cuts. 
  • U.S. job growth remained strong in April, with payrolls rising 177,000 and a net gain of 119,000 after revisions. “Core” private-sector hiring (excluding government, education & health, and leisure) rose 73,000 — nearly double the 12-month average. The unemployment rate remained at 4.2% as the labor force grew by over 500,000. Wages rose 0.2% and 3.8% year-over-year, outpacing inflation. Federal payrolls continued to shrink under DOGE cuts, down 26,000 over the past three months. 
  • U.S. personal income rose 0.5% in March, led by private sector wages, while inflation-adjusted consumption jumped 0.7%, showing strong demand ahead of new tariffs. Both core and headline PCE inflation were flat on the month, easing pressure on the Fed for immediate rate moves, though underlying inflation remains sticky. 
  • China has quietly exempted approximately 25% of U.S. imports—valued around $40 billion—from its 125% retaliatory tariffs, as reported by Bloomberg. These exemptions, though not publicly announced, are being communicated directly to companies and cover critical sectors such as semiconductors, medical devices, and aerospace components. 
  • Prime Minister Mark Carney is set to meet U.S. President Donald Trump in Washington on Tuesday for their first in-person discussion since Carney’s election victory, where he campaigned on standing firm in the trade war. The meeting is expected to kick off comprehensive trade and security talks. 

Weekly Diversion: 

Check out this video: Food for Thought 

Charts of the Week: 

The S&P 500 Index experienced significant volatility in April, dropping as much as 11.2% (13.8% intraday) month-to-date at its lowest point (also down 18.9%, or 21.3% intraday, from its peak in February to the April trough), before rebounding 15% off that intraday low to the April close. Despite this impressive rally, as of month-end, the index remained down 0.76% for the month, and down 5.3% YTD, on a price basis. Historically, the S&P 500 has never fully reversed a 10%+ intra-month decline to finish a month in positive territory since the five-day trading week began in 1952. There have been 14 prior instances where the index dropped more than 10% at its lowest and then rallied at least 5% by month-end, but in each of those cases, the S&P still closed the month with a loss, as shown in the table below (please note that this chart was created before market close on April 30th, but the index still closed down 0.76%).  

Source: Bespoke Investment Group 

Looking at historical precedents, the data above shows that when the S&P 500 has managed a 10%+ rally from its intra-month lows (after being down 10%+), the following year has typically seen strong gains. In all six previous occurrences where the index rallied back at least 10% by month-end (indicated by years highlighted in grey), the S&P 500 was higher one year later with an average gain of 22%. However, the shorter-term outlook was less consistent, with the average return in the next month being negative and only modest gains over the following three and six months. This pattern suggests that while sharp rebounds from deep declines can set the stage for longer-term strength, the immediate aftermath often remains volatile and uncertain. 

As investors look ahead to May, the old seasonal adage "sell in May and go away" gains some relevance. Historical data indicates that S&P 500 returns from May through October have been weaker than those from November through April. For example, $100 invested in the S&P 500 ETF (SPY) only during the May-October period since 1993 would now be worth $271, compared to $831 if invested only from November to April, as shown in the first chart below. Nevertheless, a buy-and-hold strategy would have yielded over $2,200 (2.65X higher than avoiding May-Oct), underscoring the benefits of long-term investing despite seasonal weakness, as shown in the second chart below. However, April has historically been the best month of the year but that didn’t pan out this year, so historical patterns and monthly seasonality are only helpful to some degree. 

Source: Bespoke Investment Group 

Sources: yahoo finance, Bloomberg, Reuters, First Trust, Bespoke Investment Group

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