On Monday morning, it looked like BMR stocks would need to give up a little ground before getting back to work. Here we are on Friday and our universe is already making progress. Clearly things weren't so awful after all.
You have a new Research Report to study and earnings season has been intense (but constructive), so we're not going to drone on at great length today. The lesson to absorb here revolves around the numbers behind the day-to-day noise.
When the week started, all but a handful of BMR recommendations joined the S&P 500 in retreat. We were only hanging onto a few scattered "points of light," mostly in the relatively defensive Real Estate sector.
Four days later, more than half of our stocks have flipped to positive for the week, giving our overall universe a slight (0.67%) but real gain. The recovery is especially gratifying in the face of a lingering 0.14% loss for the S&P 500. All we want is for our recommendations to stay moving in the right direction, fast or slow. From the overnight moves we've seen, this week is going to give us that after all.
And in the grand scheme of things, this hasn't been a scary season at all. A lot of stocks sold off on Monday, but it was only the sixth "big" day since March when the S&P 500 moved down or up a full 1% or more from close to close. Put that in context: The last two of those days were stacked in the last two weeks and both pointed down, but all they really do is balance big wins earlier in the season.
We normally expect a lot more of those big days in any given time period, so this has actually been a relatively quiet period in terms of the density of wild leaps and lurches the market is giving us. Likewise, in terms of the amount of territory stocks cover during each day, volatility is actually on the mild side. So far this month, the S&P 500 has moved in a 0.7% range from open to close. That's half of the intraday variation we've seen over the decades, putting May in position to become one of the quieter months in market history.
Small moves tend to add up well to the upside. Most months like this have produced a gain close to 3%. We're behind that curve with effectively flat performance in May before this week started the profit meter running again. The S&P 500, on the other hand, is down 1.7% for the month. When volatility is this low the S&P 500 usually ends up, making this month extraordinarily rare. We suspect statistics will be our friend as long as volatility remains under control.
What's been working? Real Estate has been on fire, up 4% this month with 1% of that gain coming this week. Technology has come back swinging, up 2% this week to give us 3% for May so far. Healthcare is up 3%. That's just enough BMR cylinders firing to keep our overall universe moving, giving other bets on the Aggressive side and our Special Opportunities time to recover their equilibrium. We'll have more detail over the weekend, but for now, the lesson here is clear: When market noise contradicts the numbers, the numbers are what you can take to the bank.