The month of May is, in any case, cursed. Per an old adage, investors should “Sell in May and Go Away.” This May too has not been free from shockwaves thanks to rising rate worries due to a hawkish Fed. The S&P-based SPY was up 0.64%, the Dow Jones based DIA advanced 0.7% and the Nasdaq-based QQQ declined more than 1.7% in the past one month (as of May 27, 2022).
For most part of the month, the indexes were downbeat. Wall Street finally ended its seven-week losing streak last week. The S&P 500 recorded its best week since November 2020. All indexes were up more than 6% each, helping the month of May to end in the positive zone.
Let’s take a look at the key ETF events of the month.
Biggest U.S. Rate Hike Since 2000
The Federal Reserve increased its benchmark interest rate by half a percentage point, matching market expectations. This marked the biggest hike in two decades in the United States. In addition, the central bank drew a program in which it will ultimately lower its bond holdings by $95 billion a month.
Fed Chairman Jerome Powell stressed on the commitment to tame a 40-year high inflation but indicated that raising rates by 75 basis points at a time “is not something the committee is actively considering,” per a CNBC article.
Energy: A Winner
The energy sector has everything that is needed right now — decent valuation, higher dividends and an upbeat operating backdrop. WTI crude ETF United States Oil Fund LP USO is up more than 50% this year. The oil and gas rally this year has been driven by the Russia-Ukraine war (Russia is energy-rich) which resulted in supply chain issues and rising pent-up demand as global COVID cases are ebbing.
The energy sector recorded a 240.6% earnings expansion in Q1, with 174.1% growth expected in Q2 – the highest in the S&P 500 Index. The “Oracle of Omaha” — Warren Buffett — too is bullish on energy giants Chevron and Occidental.
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