3 Things You Need to Know This Week | Central Bank Meetings, Q1 GDP, Sell in May

Transcript

Alexander Leiken:

Hello, and welcome to Three Things You Need to Know this week—our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. And with that, here are three things you need to know this week.

First, upcoming central bank meetings.

This week, several major central banks are set to announce policy decisions, including the Bank of Japan, the US Federal Reserve, the Bank of England, and the European Central Bank. The Bank of Japan, also known as the BoJ, kicks things off on Monday. Recently, the BoJ had been normalizing interest rates by raising them into positive territory following years of negative rates. In its previous March meeting, the BoJ opted to keep rates unchanged for the third straight month, a move that aligned with market expectations. Moving to Wednesday, attention shifts to the Fed. Last month, the Fed met market expectations when it left the federal funds rate unchanged for the second consecutive meeting. But markets reacted negatively when the committee's Summary of Economic Projections indicated inflation concerns were creeping back in to member rate forecasts. Still, the so-called Fed "dot plot" held steady, with the median member anticipating one cut in 2026. Expectations are for the Fed to hold rates steady again this week, but markets will, of course, be reading the tea leaves for any hints on future policy. Finally, the week wraps up with announcements from the Bank of England and the European Central Bank on Thursday. Markets widely expect both to hold rates steady as they continue to monitor inflation and geopolitical energy risks. With so many back-to-back meetings, some may worry differing actions by these central banks could send conflicting signals to the global economy. But markets have seen this before. Central banks don't always move in lockstep, and history shows markets don't rely on coordinated central bank policies to function. Additionally, stocks don't depend on interest rate cuts to continue rising. Central bank policy is just one of many factors investors should consider, alongside broader economic, political and sentiment drivers.

Next, US and eurozone GDP.

On Thursday, we'll get the first estimates of first quarter GDP for both the US and the eurozone. If the data comes in weaker than expected, some may point to it as evidence that the Middle East conflict is weighing on the global economy. On the other hand, strong results may be dismissed as outdated, with many expecting the conflict to impact future growth instead. From our perspective, we'd caution investors against overreacting to a single quarter's data. For starters, a disappointing GDP print doesn't necessarily signal a recession. And it's not unusual to see slowdowns or even brief contractions during a broader economic expansion. There's also been plenty of commentary labeling these GDP reports as old news because they predate the recent energy market turbulence. And while that's true, it's always been the case. Economic data is inherently backward looking. While it can provide useful context, it's never been a reliable predictor of where stock prices are headed. Remember, stocks look forward. Whatever happened in Q1 has already been long priced into the market, which is firmly focused on what's happening next.

Finally, a look at a common seasonal myth.

As the calendar turns to May at the end of this week, some investors may feel cautious about entering what may be perceived as a weak period for stocks. This sentiment can stem from the old adage, "Sell in May and Go Away." Though the origins trace back to the 19th century, today, the "Sell in May"adage is typically used to argue investors should avoid stocks from May through September or October. While this saying has persisted for decades, data tells us seasonal investing myths like "Sell in May" hold little merit. In fact, going back to 1925, all summer months have positive average monthly returns, and only September has negative average returns during the "Sell in May" period. After a volatile start to the year, with stocks nearly entering correction territory before rebounding recently to set new all time highs, some investors might see this as an opportune time to head for the exits, but for long-term investors, we'd suggest patience. True opportunity comes from knowing something others don't, not from following outdated market timing strategies, like "Sell in May". Attempting to time the market based on seasonality myths can come with a big opportunity cost. So instead, we think long-term investors are better served by a disciplined investing approach rooted in fundamental, forward-looking analysis. And that's it for this episode of 3 Things You Need to Know This Week. For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit fisherinvestments.com. Thanks for tuning in and don't forget to hit like and subscribe.