02-06-2025
'Sell in May' strategy didn't pay off: How to position for June
May recorded the best monthly market performance in 18 months. Blue Chip Daily Trend Report chief technical strategist Larry Tentarelli joins Madison Mills and Brad Smith to discuss how investors should position for June.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Today's strategy session. The market mantra of selling May and go away didn't work out too well for investors last month. So how should investors position for June, which is historically a weaker month for stocks. Joining us now, we got Larry Tenerelli, Blue Chip Daily Trend Reports, Chief Technical Strategist. Larry, it's great to speak with you this morning. This May was the best monthly gain in 18 months. When you see a record rally like that, how hard is it to get a sequel?
Good morning, Maddie. I don't think that we should expect another five percent or six percent upside month, but I do think that there's a lot of bullish momentum in the markets right now. And if there was any type of consolidation or reset, I think it would be a buyable pullback.
Larry, I wonder what is the kind of key technical indicator that you're looking at amidst some of what the analysts and investment strategist that we've spoken with are anticipating in a longer period of chop or volatility.
So the trends are very strong right now. The S&P 500 and the Nasdaq 100 are both trading over the 20 day, the 50 day, and the 200 day moving averages. So that indicates an uptrend on multiple time frames. We've got bullish weekly momentum. And we could see some chop into the summertime after such a big move in the indices, some type of a digestion period would not be uncommon, but I think it's something that we can buy into.
You said that, yeah, I hear you saying buy into the rallies. What does that buying look like? Are you buying into the mag 7 that once again emerged as the majority of the responsibility for the gaining in the S&P 500 or are you looking at the other 493? What's that looking like?
So the top ranked sectors for me are technology, industrials, and consumer discretionary. I'm not so much a fan of the entire mag 7. I've got a position in Nvidia. I've got a position in Tesla. I think those are two high upside potential ideas. The industrial sector has been very strong. Consumer discretionary has been very strong. And as long as the jobs market holds up and the economy holds up, I would expect those three sectors to lead.
Larry, I put one stat at the top of my notes. It's not deep, it's super high level, and it comes from FactSet. 98% of the S&P 500 companies have reported earnings. So, as we're essentially with earning season in the rearview mirror, a couple household names are still going to be kind of rolling out results here and there. But all things considered, how does this setup, especially knowing the guidance coming off of this most recent earning season, what's that setup look like for the summer? Are we due for some perhaps relief rallies if companies come out and say, all right, things weren't as bad as we had forecasted, and we can also offer a bit more guidance going forward from here.
I think that's very possible that we could get a relief rally. At the end of March and going into April, the markets had really priced in a worst case scenario from the tariff news cycle. And we haven't seen that worst case scenario play out as of yet. Earnings have come in fairly strong. So I think as long as earnings hold up and we don't get any major downside surprises, or we don't get any major step back in the tariff news cycle, I think that does set us up for higher.
Larry, those are some pretty big ifs, especially given some of the headlines that we've got with the US and China both saying that each other is failing on their side of the trade bargain. How are you thinking about how risky tariff policy is going to be to this market over the course of the summer here?
There is definitely risk. So as you can see, we've got a very high volatility news cycle. Luckily that the news cycle over the past month or so has been positive. But there's always risk. We should expect 1 to 2% daily ranges in the S&P 500 on May on any major headline. So I think that's something that we want to keep in the back of our minds, but until it happens, I wouldn't spend too much time focused on it.
Larry, just lastly while we have you here, I know that Palantir, as we know, is one of your top ideas here. And for Palantir recently getting more government contracts, and we know that this is a space where they highly rely on government contracts for their future recurring revenue run rates as well. They just got this new partnership. It seems like they're working even more so with the Trump administration and setting aside any of the concerns around surveillance of citizens. It seems like that is where they're going to be leaning into some of those relationships with the administration to garner even more of their revenue base. Just want to get your kind of updated assessment on them.
So Palantir, still my favorite tech idea, and I think they're really in a sweet spot. They dominate their industry, they dominate big data and AI, and they are tied in with some very high value contracts with the US government. So that is definitely a bullish tailwind. And unless there's some type of a major step back there, which I don't expect due to the stickiness of their relationship with the government, I think that sets the stock up for higher.
All right, Larry. We'll continue the conversation here. Thanks so much for joining us here. Appreciate it.
Brad, thank you so much.
