The month of April, traditionally a rainy period, gives way to May, when flowers bloom and people begin looking at the summer months ahead. It can also be a metaphor that a period of discomfort can provide a period of happiness and joy.
Unfortunately, this year heavy rains across the county are flooding large swaths of the country and destroying crops and flowers alike. In the financial markets the S&P 500 is certainly underwater as it has declined 6% from the beginning of May to May 29th. Interest rates are predicting storms ahead as the yield curve has inverted. An inverted yield curve is when you get paid more interest to lend short term than long term. A six month US Treasury will pay you 2.38% yield while a ten year Treasury bond pays you 2.25%. Typically you get paid more the longer the term of the loan is. When its inverted its usually because the markets think the economy will get weaker the further out you go. Thus, an inverted yield curve is often considered a warning sign of an upcoming recession.
Right now with all the China Tarriff trade war uncertainty as well as the ongoing political rumblings the markets may just be pocketing recent gains and waiting out the uncertainty. One would expect the storm clouds to clear, but its not clear when the flowers will bloom again.
-The Leisure Capital Management Team
