“Sweet April showers, do spring May flowers.” – Thomas Tusser
We are all familiar with some version of the rhyme about April showers and May flowers, though the meaning behind the words may be a bit deeper than you have previously imagined. First mentioned by Thomas Tusser in a book containing succinct advice for farmers (circa 1557), it was meant to be a lesson in patience, reminding us that we must endure the unpleasant heavy rains of April, if we are to enjoy abundance of flowers in May, which in turn signify a bountiful harvest in the fall.
This April has indeed been a bit dismal for investors, as markets have responded to inflationary pressures, an increasingly aggressive Fed, geo-political turbulence, and ongoing challenges to global supply-lines.
The Fed is raising rates to combat a 40-year high in inflation, and markets are clearly unsettled with how aggressive the Fed is becoming. Despite earnings and economic data coming in well, stocks were down for the month. The S&P 500 returned -8.72% for the month and -12.92% year-to-date. The best performing sectors in the S&P 500 were consumer staples, energy, and materials, while technology stocks suffered the worst month since the market downturn in 2008. In fixed income, yields continue to rise with expectations of interest rate policy changes.
There is no guarantee that May will provide a rosier picture for investors, yet the lesson of patience remains. We endure periods of elevated market volatility, while staying focused on the time-tested disciplines of diversification and periodic rebalancing, in anticipation of harvesting the long-term rewards available to investors who do so.
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