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“Sell in May..?”
Aurelie Barthere
Key Takeaways
3 min read
  • The May seasonality, which is associated with a statistical underperformance of equities, and a challenging fiscal, lending, and monetary backdrop, are currently weighing on risk assets.
  • Crypto tactical indicators are also turning less bullish.
  • Crypto and other risk assets are unlikely to correct significantly before US growth falters, though. The odds of a recession are higher after 2023, once US households’ $1.6 trillion excess savings have dried up.

Slow disinflation, hawkish Fed speakers

US core CPI is slowly decelerating, with the 3-month annualized YoY rate reaching ~5.2% in April, still way above the Fed’s 2% target. Shelter, one of the stickiest components, has posted a lower growth rate for the first time since since January 2021, at 8.1% in April 2023 vs a peak of 8.2% YoY in March 2023.

The Case-Shiller U.S. National Home Price Index leads Shelter inflation by 12-month and has correctly predicted the lower April rate, although the index tends to underestimate the level of Shelter Inflation (regression r-square of 46%). If this leading relationship holds, Shelter inflation should continue to cool into 2024, leading core inflation lower.

Outside of...