“Sell in May and leave the stock market?” … fear of the next ‘perfect storm’

At the end of the holiday season, the fear of a ‘perfect storm’ in which two or more bad news coincide at the same time in the open domestic market, requires the attention of investors. In particular, in May, the queen of the season, Wall Street is considered the month of high stock prices, as Wall Street has the ‘Sell in May’ myth.

According to the Korean Stock Exchange 4, KOSPI collapsed by almost 2.7% to break the 1900 line. On this day, individual investors bought more than 1.6 trillion won, but as investor sentiment declined due to global economic unrest, foreign and institutional investors generated large numbers, causing the index to drop.

Kim Yong-gu, a researcher at Hana Financial Investment, said: “The current characteristics of the domestic and foreign stock market can be defined as a tug-of-war between national and foreign macros, performance fundamentals and policy variables of the main countries that they remember a total war. If fully trusted, the market in May is likely to become less optimistic and turn into a return on investment strategy that is pessimistic. ”

The global stock market is contributing to the bad news for May. During the Korean holiday season, the global stock market first experienced volatility.

In Europe, the monetary policy of the European Central Bank (ECB) fell 2.8% over the course of two days of trading at EUROSTOXX, disappointing that expectations did not expand the scale of asset purchases. The S&P 500 also fell 3.7% during the same period that the New York Stock Exchange also continued to experience declining corporate earnings. The entire market shook when Amazon suggested a possible deficit in the second quarter.

In fact, IBK Investment & Securities analyzed KOSPI’s returns in May for 10 years from 2010, after the global financial crisis, and recorded 7 out of 10. It means that the probability that the rate of return in May will drop to 70%. Furthermore, as the possibility of a trade dispute between the US arose. USA And China during the Christmas season, the market was really a ‘storm’.

On the 30th of last month (local time), the President of the United States, Donald Trump, blamed China for the occurrence of Corona19 and expressed his willingness to impose tariffs worth approximately 1 trillion dollars (around 1200 trillion won). ). Additionally, staff such as Secretary of State Pompeo and Larry Cuddler, the White House National Economic Commissioner for Economics (NEC) and others also expressed anxiety by adding responsibility to China.

Although no effective tariff measures have been proposed, the market is experiencing negative reactions due to the long-term volatility of the trade dispute between the United States and China.

Researcher Seo Seo-young of Samsung Securities said: “With the news that significant treatments like Corona 19 slowing down and Remdecivir, the rise in the stock market appears to be difficult at the moment, as the conflict between the United States and China restarts. ” “You need to be careful about downside risks rather than rising expectations, as there may also be a pace adjustment between the stock markets.”

However, it is also advised that pessimism in May may be evident when considering economic cooperation and the global economic recovery of each country that responds to Corona 19.

“Unlike in the past, when global economic and political uncertainty intensified, it served as a starting point for the stock market crash in May this year, the political momentum of the two countries in the Federal Reserve System (Fed) keep going”. “The possibility of breaking bad news in May is negligible, given the complex participation of individual investors, who are represented by the so-called ‘Donghak Ant Movement’ and the government’s active policy to push forward the policies.”

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