The threat of China liquidating Treasuries as a bargaining chip in trade negotiations remains a possible scenario, but in our view a highly improbable one. As the saying goes, “If you owe a bank $100, you have a problem. But if you owe a bank $1,000,000,000, the bank has a problem.” China owns a large amount of U.S. Treasuries ($1.2 trillion, to be precise) [Figure 1]. The most recent data from the U.S. Treasury indicate that China actually increased its holdings during February. More updated data will be available next week, which could give investors more insight into China’s intentions.

We don&r

“Sell in May and go away” is probably the most widely cited stock market cliché in history. Every year a barrage of Wall Street commentaries, media stories, and investor questions flood in about the popular stock market adage. This week, we tackle this commonly cited seasonal pattern, while focusing on some reasons it may not apply this year.

The Worst Six Months of the Year

“Sell in May and go away” is based on the seasonal stock market pattern in which the six months from May through October are historically weak for stocks, with many believing that it’s better to simply avoid the market

The first week of May brought a deluge of economic data, including the April jobs report, key surveys on business activity, and some important readings on inflation. Add in a Federal Reserve (Fed) policy meeting, and it’s fair to say that the most important week of economic data in May is already behind us. Looking at these reports together, the economy still appears to be in an economic sweet spot, producing solid growth but not enough to cause us concern about an overly aggressive Fed. Rates will still push higher at a moderate pace and it’s natural for financial conditions to tighten as we move later into the economic cycle, bu

Time to check in on stock valuations. After providing our assessment of stock market fundamentals, sentiment, and technical conditions over the past few weeks, this week we turn to the last piece of our investment process: valuations. Here we will make the case that stock valuations are reasonable, despite above-average price-to-earnings (PE) ratios.

Valuations Have Come Down

Before making the case that stocks are fairly valued, we want to first point out how far valuations have fallen in recent months. Our favorite valuation tool for stocks, the PE ratio, has seen a falling “P” and a rising “E.” The S&