In this episode of The Glass Half Full, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, break down a historic Fed meeting, bust the “Sell in May” myth wide open, and make sense of a GDP report that looks soft on the surface but tells a very different story underneath.
Ryan kicks things off with the headline that made an otherwise expected Fed meeting anything but ordinary: Jerome Powell is stepping down as Fed Chair on May 15, but he is not leaving. In an unprecedented move, Powell will remain on the Federal Reserve Board as a governor, the first Fed chair to do so since Mariner Eccles in 1948. Ryan and Sonu dig into why Powell is staying, what it means for Fed independence, and what to expect as Kevin Warsh moves through Senate confirmation ahead of the Fed’s June meeting.
From there, Ryan takes on one of the most persistent seasonal myths in investing: Sell in May and go away. The numbers tell a different story. Nine of the last 10 years, the market was higher through the May-through-October stretch. Last year was the strongest such period in history, up nearly 23%. Ryan’s message is simple: don’t sell, don’t go away, and don’t let a catchy axiom make your portfolio decisions for you.
Sonu closes with the economic picture, unpacking a GDP report that clocked in at roughly 2% real growth but carries a more important number underneath: nominal GDP growth running at a 5.6% annualized pace. That is the number that drives corporate revenues and profits, and it is running well above the pre-pandemic trend. The catch is that inflation is running just as hot, keeping the Fed firmly on hold and making rate cuts increasingly unlikely. Strong nominal growth, strong profits, strong earnings season, and a bull market that Ryan and Sonu believe still has room to run.
Key Takeaways
- Jerome Powell is leaving the Fed Chair role on May 15 but will remain on the Federal Reserve Board as a governor, a move unprecedented since Mariner Eccles in 1948.
- Kevin Warsh, Trump’s nominee for Fed Chair, is expected to be confirmed and in place ahead of the Fed’s June meeting.
- The “Sell in May” axiom does not hold up to scrutiny. Nine of the last 10 years, stocks were higher during the May-through-October period, with last year posting the strongest such stretch in history at nearly 23%.
- Real GDP growth came in at approximately 2% in Q1, below trend, but nominal GDP growth is running at a 5.6% annualized pace, which is what matters most for corporate profits and stock prices.
- AI-related capital spending is surging, with IT equipment up more than 40% and software spending up roughly 23%, though heavy imports are muting the headline GDP number.
- Core inflation running at 4.4% annualized keeps the Fed on hold, making rate cuts unlikely for the foreseeable future, but strong nominal growth remains a tailwind for equities.
Jump to:
0:00 — Powell Steps Down, but Stays on the Board
2:35 — Busting the Sell in May Myth
3:29 — What Drove Q1 GDP Growth
4:48 — Nominal Growth, Inflation, and the Fed’s Bind
6:32 — Bull Market Takeaways and Wrap
Connect with Ryan:
- LinkedIn: Ryan Detrick
- X: @ryandetrick
Connect with Sonu:
- LinkedIn: Sonu Varghese
- X: @sonusvarghese
The views stated in this podcast are not necessarily the opinion of Cetera Wealth Services, LLC, or CWM, LLC. and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Ryan Detrick and Sonu Varghese are non-registered associates of Cetera Wealth Services LLC.
A diversified portfolio does not assure a profit or protect against loss in a declining market.
Please note: Cetera Wealth Services, LLC is not registered to offer direct investments into commodities or futures. Instead, we provide access to this asset class via mutual funds, exchange-traded funds (ETFs) and the stocks of associated companies. Investments in commodities may be affected by the overall market movements, changes in interest rates and other factors such as weather, disease, embargoes and international economic and political developments. Commodities are volatile investments and should form only a small part of a diversified portfolio. An investment in commodities may not be suitable for all investors.
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