Market Musings 310525: The Ides of May Augur Well
Market Musings 310525: The Ides of May Augur Well
Podcast this week:
Who benefits from a weaker US dollar?
(click link to listen)
In this podcast, Edmund Shing, discusses the US dollar's weakening situation and its beneficiaries.
Key points:
“Sell in May and go away” has been terrible advice this year!
Best May calendar month performance for the stock market in 25 years, with the S&P 500 up 6% (best May performance since 1990!) and +7% for the German DAX and the Italian FTSE MIB indices also both up nearly 7%.
On a statistical basis, when the US stock market performs so well in the month of May which is not traditionally a strong month for stocks,The market has always been higher one year later, 10 out of 10 times when the S&P 500’s May performance has exceeded 5%.
The key variable to watch remains bond markets, with long-term bond deals rising sharply. This suggests stress due to potentially unsustainable budget deficits and growing sovereign debt burdens.
In the short term, there are several measures that the US can use to drive up demand domestically for US government bonds, such as loosening the Supplementary Leverage Ratio for US banks, incentivising banks to buy more US Treasury bonds. This may limit any further increases in the 30-year US bond yield for now. Equally in Japan, the Ministry of Finance is shifting its bond issuance schedule to favour shorter maturities, given the sharp rise in the 30 year JGB bond yield to 3%.This is the highest level reached in decades.
Watch also the US dollar as this looks like it's about to break down looking at the DXY index.In general, a weaker dollar is usually positive for macro liquidity and thus good for stocks, corporate bonds and commodities.
Strongest performing segments of the stock markets include:
European Small Caps,
Junior Gold Miners,
Video Games/E-sports,
Listed Infrastructure.
Charts:
May not usually so good for stocks
S&P 500, DAX, FTSE MIB all performed very well over May
Ultra-long bond yields rise sharply, highlighting that bond investors worry about growing debt burdens
US dollar threatens to weaken further
The last time the Dollar weakened heavily (2001-08), gold did well
European small-caps are waking up after long under-performance
Junior Gold Miners: a leveraged play on Gold
Video games beat US Tech in 2025
Listed infrastructure en vogue
Disclaimer
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13 comments
Surely countries that buy in all/most of their energy, mainly in the form of fossil fuels, must be major beneficiaries of a weaker dollar? Oil price is down c20% YTD and the dollar what 8%? Japan for example must be doing well from this. World shipping industry, airlines (especially if they are placing orders with Boeing too) and Cruise lines should all be very happy too. Or is that too simple a way of looking at it?
Hi Edmund. Stupid question of the day but AI did not seem to help.
What is the difference between LSE listed ETFs Global X Cybersecurity UCITS ETF USD Acc (LON:BUGG) and Global X Cybersecurity UCITS ETF USD Acc (LON:BUG) - they both seem to hold the same according to AJBell and both in dollars (so no FX issue). AI said they don't hold the same but AJB differs and yes sorry half hour DYOR may answer.
I've got no idea who's going to come out tops in the cyber security wars (I though of space but nah its a war) so an ETF at least gives me skin in the game. Palantir Technologies (NSQ:PLTR) was always a 'bargepole' but onwards and upwards it goes.
See BUG or BUGG hold BlackBerry (NYQ:BB) - the city gadget of the day and at least the brand name still around - I guarantee there are some subscribers on here that miss the tactile buttons - good god the skill in texting that was achieved and speed - but we are in a better place yes.
Anyway talking to the thing is the future - or even imagining it with your brain implant.
Gold has been bearish this week but for sure VanEck Gold Miners UCITS ETF USD A (LON:GDX) and VanEck Junior Gold Miners UCITS ETF USD A (LON:GDXJ) are two of my core hold/watch. These have both a USD and a GBP listing. Noted the falling $ comment.
Some of the ETFs above have not heard of so thanks for the intel. See you have adopted TradingView - bit easier than the Bloomberg Terminal maybe.
Harry, Global X Cybersecurity UCITS ETF USD Acc (LON:BUG) and Global X Cybersecurity UCITS ETF USD Acc (LON:BUGG) are the same fund. It's just that BUG is traded in US dollars and BUGG is traded in GBP. It's fairly clear if you look at the detail on justetf.com.
Hi Harry
Acttually checking this ETF (see this link to the justetf.com website), BUGG is priced in GBP pounds while BUG is priced in US dollars. So that is the only difference, you hold the same underlying stocks...
Edmund
If you have a moment Edmund would be interested in your thoughts on the possible incoming section 899 part of the big beautiful bill it seems the current US administration almost want to discourage investment by foreigners in the US moving forward.
Also interested in what asset classes you see it being positive or negative for,
Can you explain what section 899 is?
Hi my guess is its point/section 899 in the big beautiful bill that is now going through in the US and if it passes it will allow the US treasury to tax the US assets of foreign holders eg UK pension funders if they deem them an unfriendly nation to the US.
The tax will start at 5% and could rise to 20% at the moment it looks like it would just be on income/interest distributions not capital gains.
Sell in May, don't come back until St. Ledger's day.
Think you missed the second part.
Need to assess this on St. Ledger's day, traditionally the end of September. I suspect (but could be wrong) that the market will be down significantly by that date.
What do you believe will be the catalyst for such a reversal?
Trump
This is extremely informative. I have shifted towards smaller cap U.K. stocks. I note that the dollar could potentially weaken by 10% in the short term! Thank you for all your hard work Edmund.
Seconded we are fortunate to have Edmund regularly posting here love his macro articles.
My head hurts, but all good fun none the less.