A contrary piece of advice has emerged to the stock market adage in the U.S. known as "Sell in May." Instead, it suggests "Buy in May," meaning one should purchase in May. Within the securities industry, there is an expectation that when a certain customer threshold is surpassed, the U.S. market will rise; this is expected to occur between the end of this month after earnings announcements and early next month.
On the 1st, Kim Seong-hwan, a researcher at Shinhan Investment Corporation, noted, "Through the sharp drop in February and March, the (U.S.) stock market has significantly relieved the technical burdens accumulated over the past two years," adding, "If tariff uncertainties peak in early April, the remaining concern will be strong performance in the first quarter."
First-quarter results are likely to be a robust performance, contrary to market concerns. The weakening of the U.S. dollar and better-than-expected real figures, along with the momentum of artificial intelligence (AI) corporations, provide the basis for this.
Research Institute Kim anticipated, "In this scenario, the market is expected to return to an upward trend from late April to early May, after the earnings season." Shinhan Investment Corporation presented a fluctuation range of 5,400 to 6,100 points for the Standard and Poor's (S&P) 500 index in the second quarter. Kim explained, "I expect support for the index in the area of 5,500 points."
The analysis is further reinforced by the observation that in the early phase of the third year of a technological innovation bullish market, there was a pattern of the Nasdaq 100 index experiencing a sharp decline, as seen in January 1995 and July 2016. This correction was about 15 to 25% from the peak and lasted three months.
Research Institute Kim stated, "The U.S. stock market has resolved technical overheating while facing concerns that fundamentals will deteriorate," adding, "This concern cannot be refuted until early in the second quarter, so there is no need to urgently increase positions at the beginning of the quarter."
In the past, when leading stocks rapidly lost supply to neglected stocks and rebounded due to earnings strength, leading stocks often displayed an N-shaped rebound pattern over a span of 3 to 4 months. Research Institute Kim explained, "Considered previous examples, existing leading stocks are likely to return after May, even if they resurface fully, so early in the quarter, it’s necessary to focus on neglected stocks."
He also presented sectors such as pharmaceuticals and biotechnology, medical equipment, transportation, consumer goods, and food and beverage stocks. Research Institute Kim noted, "Although existing leading stocks are likely to return in the latter phase of the N-shaped rebound, stocks that ride the themes often do not participate even when leading stocks rebound." He added, "Earnings stocks and thematic stocks will diverge," stating that "AI, platform, finance, and technology stocks will attempt to rebound as earnings stocks."