"Sell in May, and Go Away" Strikes Again

Traders are conditioned to expect bank bailouts by the Euro-zone governments, with some help from the ECB that staves off a calamity, and keeps kicking the can further down the road.

 

What's different this time around however, is the severity of the economic malaise in Europe, - a depression in Greece and Spain, and France and Italy teetering at the tipping point of a deep recession. Europe's slump is dragging down the export sectors of Brazil, China, India, Korea, and Taiwan, and a host of other countries. A slumping global economy, signaled by weaker industrial commodity prices, would eventually be difficult for Wall Street to ignore. The odds of the Fed launching a third round of QE in the months ahead are slim to none, since the Fed can't be seen electioneering for the Obama administration, while fending off strident attacks from the Republican opposition. In a bid to stay neutral, the most the Fed can do to help a slumping US-economy is to promise to keep the fed funds rate locked at zero percent and possible extend Operation Twist. "History doesn't repeat itself, but it sure does rhyme."