Sell in May: still relevant

SP500

Key zone: 7,000 - 7,200

Buy: 7,150 (on strong positive fundamentals); target 7,300-7,350; StopLoss 7,080

Sell: 6,950 (on a decisive break above 7,000); target 6,750-6,700; StopLoss 7,020

On April 17, 2026, the S&P 500 hit a new all-time high at 7041—just weeks after dropping about 10% amid geopolitical tensions around Iran. This sharp rebound comes at a time when seasonal profit-taking typically intensifies across global markets.

Reminder:

The average return of the S&P 500 from November to April is about +7.2%, while from May to October it is only around +2.3%. This seasonality is not a strict rule, but it is statistically consistent.

At the same time, the current market dynamics have several distinctive features:

• Four out of the five largest daily gains this year occurred during the military conflict period.
• The “Magnificent Seven” added $2.5 trillion in market cap in just eight trading sessions.

Typically, May–October is a moderately positive period, but in 2026 the market is pressured by several specific factors:

• an unresolved oil shock;
• equity overvaluation and high margin debt near historical highs;
• uncertainty surrounding a potential change in Federal Reserve leadership.

Historically, markets tend to “test” new Fed chairs. For example, after Jerome Powell’s appointment, the S&P 500 dropped nearly 20% in late 2018 following tighter policy rhetoric, while Alan Greenspan faced the 1987 crash shortly after taking office.

It is expected that under Kevin Warsh, Fed policy would be stricter on inflation and less flexible in supporting the labor market.

The current rally was initiated not by long-term investors but by hedge funds covering short positions. It was then amplified by algorithmic strategies and retail investors, increasing the risk of a sharp correction.

Additional pressure comes from energy markets. Despite a temporary pullback following a short-term truce, oil remains firmly above $100, reinforcing inflation risks and limiting the Fed’s ability to cut rates. Under Goldman Sachs’ bearish scenario, the index could fall to 5400 (about −23% from current levels).

From a fundamental perspective, the market also appears overheated:

• forward P/E stands at 20.9x—above 5- and 10-year averages (19.9x and 18.9x);
• the top 10 companies account for 39% of market cap and 31% of index earnings.

Such concentration means weak earnings from giants like NVIDIA or Microsoft could impact the entire market.

Conclusion

The current market is increasingly driven by sentiment and behavioral factors rather than fundamentals. The popular TACO strategy (Trump Always Chickens Out) reinforces investor confidence that major declines will be prevented by political decisions, further distorting risk perception.

JPMorgan forecasts the S&P 500 could reach 7600 by the end of 2026 (about +7%), but the key issue remains the widening gap between asset prices and the real economy.

Geopolitical risks persist: oil supplies are constrained, inventories are declining, and the conflict is far from over. Against this backdrop, markets are trading expectations rather than facts.

JPMorgan experts have raised their year-end 2026 S&P 500 target from 7200 to 7600 points, implying about 7% upside from current levels.

In the medium term, a more defensive approach is justified:

• prioritize risk management and profit-taking;
• consider long positions in gold as a hedge;
• trade oil cautiously due to high volatility.

Gold futures may be attractive on a medium-term horizon, while crude oil futures should be traded carefully—both could benefit if geopolitical stress and inflation hedging remain elevated.

So we act wisely and avoid unnecessary risks.

Profits to y’all!