BlackRock sees 3 reasons why stock investors should stay in the market in May

The benchmark S&P 500 (SP500) (VOO) (IVV) has stepped higher in nascent May trade, and after April’s selloff, BlackRock’s (BLK) top strategist listed why investors should stick with the equity market.

Wei Li, chief global investment strategist at the world’s largest asset manager, challenged the “Sell in May and go away” adage well-known on Wall Street after the S&P 500, the Nasdaq Composite (COMP:IND)(SPY) and the Dow industrials (DJI)(DIA) in April snapped a five-month win streak.

“Sell in May and go away? I think not, and here is why,” Li wrote in a LinkedIn post over the weekend:

1. The Federal Reserve crystallised high for longer and pushed against highER for longer
2. While still robust, labour market may be getting less tight
3. Buyback boom, and not just the big names we read in the news

While Li didn’t elaborate on the first and third points, her first point comes after Federal Reserve Chair Jerome Powell last week essentially pushed back against market fears that policymakers would raise interest rates to cool down stubbornly high inflation. Powell indicated rate cuts remain on the table but those are taking longer than anticipated to begin because inflation has stalled above its 2% target.

Point three comes after Apple (AAPL) last week set a record-breaking program to buyback an additional $110B shares of the company. Other companies announcing stock buyback plans this year include Disney (DIS), Meta Platforms (META), Uber (UBER), and Airbnb (ABNB).

For point two, “less tight” labor market conditions include lower wages, lower job creation, and lower vacancies. “This links to services inflation,” Li said, and included a chart about nonfarm payroll changes from 2021 through so far in 2024:

The S&P 500 (SP500) has picked up +2% in May through Monday’s close.

Two ETFs with the theme of buybacks come from Invesco: the Invesco BuyBack Achievers ETF (PKW) and the Invesco International BuyBack Achievers ETF (IPKW).