Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.

Traders are preparing to deal with the risk of significant market volatility after next week's US presidential election, causing the price of hedging against USD fluctuations to soar to the highest level in nearly two years. The Bloomberg Dollar Spot Index's one-week implied volatility measure rose to the highest level since December 2022 on Wednesday, when concerns about an economic recession once swept through the financial markets. This indicates that traders are preparing for significant fluctuations in the USD against major currencies such as the euro, yen, yuan, and Mexican peso, thereby increasing the cost of options to hedge against such fluctuations.

Barclays Bank's forex strategist Skylar Montgomery Koning said, "Elections are a binary event for the forex market, increasing the demand for forex hedging." He noted that emerging market currencies, including the peso, yuan, and won, are the most sensitive to the US elections.

The USD Index has risen by over 3% since October and is poised to achieve the best monthly gain since September 2022. Bond yields surged as the US economy continued to unexpectedly exhibit strength. The Bloomberg Dollar Index saw its first decline in trading for four days on Wednesday, but remains close to its highest level since July.

With expectations for a sharp Fed rate cut diminishing, derivative traders are bullish on the USD now and believe that US bond yields will remain higher than other regions'. If election-related uncertainties prompt investors to seek safe havens, or if Donald Trump's victory leads to tax cuts and high tariffs on major trading partners, exacerbating inflationary pressures, then the elections may have an impact.

Tax cuts will inject more stimulus into the economy and worsen the deficit, making betting on rising yields a so-called Trump trade. Meanwhile, tariffs may reduce the demand for foreign currencies by curbing imports, further supporting the USD.

Steve Englander, Global G-10 Forex Research and Head of North America Macro Strategy at Standard Chartered Bank, wrote in a report on Wednesday, "We believe the market could be prematurely pricing in not just a Trump victory, but also Trump sweeping the US and actively implementing his tariff policies."

The implied volatility of the USD Index surged on Wednesday. The expected volatility for the euro and British pound in the next seven days will reach the highest level since the banking crisis in March 2023. Unlike developed markets, market volatility for the peso and yuan is expected to continue into next month. In developed markets, such volatility is expected to diminish in the weeks following the vote.

For the usd, the market trend 'indicates uncertainty about the US election,' said Mark Chandler, Chief Market Strategist at Bannockburn Global Forex LLC. 'The usd has reached levels unseen in several months, which may help support forex volatility on a larger scale.'

Editor / jayden