Sell in May? The adage "sell in May and go away" is based on historical seasonality patterns suggesting weaker equity returns during the summer months. However, looking at monthly returns for the US equity markets over the last 30 years suggests that it is actually August and September that are the weakest months of the year. As such, it is when investors come back from holidays that we should be worried about equity risk. For this year, despite the seismic shift in the US trade policy, the month of April ended up flat for the US equity markets, which makes selling equities in May much more compelling this year. This is particularly the case as earnings expectations for US equities have been revised down in the last month, making the 12-month forward PE ratio higher for US equities since before Liberation day.

Earnings – glass half full: at the time of writing, 80% of US and 50% of European companies have reported earnings numbers. While the aggregate earnings surprise in positive by 8% in the US and 7% in Europe, barely half the companies have managed to beat revenue estimates in both these regions. In reporting 1Q numbers we have hardly had any impact from tariff rates, which have only been in place since the beginning of April. As of now, stocks analysts still expect US earnings growth of 8% and to be flat in Europe. Although these estimates are rapidly coming down. We believe investment into themes with secular growth stories and less exposure to tariff threats could be the ones to own in the current environment.

Looking ahead: with positioning now cleaner on the consensus trades seen over the last two years, we believe investors should consider some of the long-term themes highlighted in this publication. Our scorecard currently suggests a high ranking for Global Infrastructure followed by the European Paris aligned benchmark index. In our last publication (QIS Thematics: Greed and Fear) we highlighted our preference for our Global Infrastructure index. This index is up more than 5% since publication and still scores the highest in our universe based on earnings momentum. In the current uncertain macro environment, we believe earnings momentum is likely to be the best factor to own. This is particularly because companies with the strongest earnings momentums are likely to be the ones least impacted by global trade uncertainty. In addition, we remain constructive on the AI and VR themes and, after the valuation reset, we see the current entry point as attractive for long-term allocation.