Debt Ceiling, Sell in May and the Look Ahead to June

Debt Ceiling

Another month comes to a close and another crisis has been averted. The stock market continues to be stuck in a range of indecision. The indecision has largely been caused by the debt ceiling crisis, which now seems to finally be at the point of resolution, although we are at the finish line and while the debt ceiling deal has been agreed to by both party leaders, it has, at the time of this writing, not been passed by Congress. The US Federal Government is set to run out of financing on June 6th, so hopefully a deal will be passed through Congress before then.

The problem stems from Republicans and Democrats, which have a slim majority in Congress. There’s opposition from the radical elements of both parties, so that the leaders may not be fully in control. This uncertainty casts a shadow of doubt over the expectations that the bill will be passed. Of course, it will most likely sail through Congress and be signed into law by the president if all goes as planned

The debt ceiling deal itself is a two-year deal that will only push back this ongoing problem for another two years. Which means the next presidential administration and Congress will need to deal with it again. It does cut spending and will bring spending in line for the next two years, but the underlying problem will still remain; too much spending and not enough revenue to service the debt and pay for all of the other ever  increasing liabilities such as Social Security.

Sell in May and Go Away

The month of May is usually the month where traders and investors have historically said, “sell in May and go away”. That trend has not worked the past few years as massive government stimulus packages due to pandemic, fueled rallies that lasted throughout the summer months.

What to Expect in June

June is a traditionally bearish month. Expect a small rally on a deal being passed and signed into law,  but valuations are still historically high. Summer tends to be a low volume time of the year where many fake outs and breakouts often lack follow through.

In-Person Training

Finally, be sure to sign up for our live Training Event being held on Monday, July 17th at the Nasdaq Marketsite in NYC. Space for the event is extremely limited and from now until June 15th, we are offering an early bird discount to those that sign up and use the code: BLOG100.