Bad start to May is a sign of things to come for markets

Bloomberg

Sell in May and go away? The negative start to the month raises concern that the partial recovery in April is going to be about as good as it gets for risk assets.
For all the optimism stemming from the gradual easing of lockdown measures in some of the biggest economies, there are too many worries on the minds of traders to sustain the momentum from last month. The fear of a second wave of infections, the collapse in corporate earnings and the shocks reverberating from the economic data are toxic enough. Now throw in a fresh eruption of political sparring between the US and China.
“The smokescreen of another bilateral issue ahead between the US and China over the origins of the coronavirus pandemic will pick up steam,” Jameel Ahmad, a markets analyst at FXTM in London, said in a message.
Asian markets and equity futures provided a taste of how the week may unfold. Hong Kong’s Hang Seng Index bore brunt, tumbling 3.8%. S&P 500 Index futures retreated as much as 1.8%, while European futures sunk more than 3%. Japan and China were shut for holidays.
The dollar and yen rose on demand for haven assets, with the Bloomberg Dollar Spot index gaining 0.4%. The Indonesian rupiah led a drop in emerging-market currencies in Asia, posting its biggest one-day decline in six weeks. Treasury cash trading was shut, with Japan on holiday.
Warren Buffett tempered his normally bullish optimism during an hours-long meeting for Berkshire Hathaway Inc. shareholders. A lot of uncertainty hangs over the market, he said. Still, he expects equities will outperform Treasuries over the long run and urged investors not to bet against America.
Though US stocks clocked up their best month since 1987 in April, prices slipped as a string of companies issued profit warnings and president Trump stepped up condemnation of China over trade and the handling of the Covid-19 outbreak. The S&P 500 retreated 2.8% and US Treasury yields dropped.
The biggest new development that could weigh on emerging markets is the pick-up in geopolitical tensions between the US and China, and really in some ways the rest of the world versus China, said Eric Stein, Boston-based
co-director of global fixed income at Eaton Vance Corp.
Ali Malik, a senior investment adviser at Bank of Singapore Ltd said, “the composite and services PMIs will be crucial for understanding what the reopening of China’s economy has led to in terms of improved productivity.

However, the import and export data will perhaps be of even more significance because it will highlight what headwinds the majority of the world entering its own state of lockdown last month had on China’s own economy.”
“We do believe that reopening is going to be the way forward, and that we are going to see that across countries gradually, starting from countries that have first experienced” lockdowns,” he added.