DOGE’s Failure and the Only Way Out By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - “Sell in May” is a meme worth burying…
- June is a worse month, but not for all stocks…
- A fresh crop of Power Factor stocks to check out…
- DOGE can’t stop the machine…
- “Running hot” is the only way out…
Sell in May and go away, come back on St. Leger’s Day… We’ve all heard it. And it’s just so catchy, we can’t help but believe it. Stocks do worse from summer to fall and better from winter to spring. You should sell in May and come back in November. It’s just become a commonly accepted truth and few investors will ever bother to test it. Well, count us among the few. I shouldn’t need to say that the U.S. stock market of the 21st century is quite a bit different than the London stock market of the late 18th century, the place and time this phrase came from. I shouldn’t even need to say that today’s market is different from that of the 1960s, when the Stock Trader’s Almanac revived this phrase and placed it into the modern trader’s lexicon. But, well, it is. The market is leagues bigger, faster, and has far greater participation today than it did in either of those times. That changes the mechanics of markets and breaks old adages. And that means “Sell in May” is bunk. Here’s the proof… If you sold in May and went away in 2025, you screwed up. As I write the S&P 500 is up more than 5% for the month. You might chalk that up to a recovery from the tariff-induced panic sell-off. But most of that recovery happened during April – the S&P 500 bottomed on April 7, just five days after Liberation Day. But I’m not going to sit here and say May of 2025 alone breaks “Sell in May.” Really, it’s the entire 21st century that puts the meme to bed. On average, the S&P 500 ETF (SPY) has been up in May 64% of the time going back to 2000. The average return, counting wins and losses, was 0.6%. The average return when May is positive is 2.8%. The data just does not support May being a particularly weak month. If you’re looking for a month to sell in right now, you could do a lot better in June. SPY is up 56% of the time in June for an average return of -0.1%. When June is negative, SPY falls -3.5% on average. There is a distinct seasonal summertime trend. It just doesn’t start in May. It starts now. And we should expect headwinds for stocks over the next few weeks. Of course, that doesn’t mean you can’t make money in June… As I’ve said time and again, seasonality is neither a blessing nor a curse. It just tells you where to look, and when. At the start of each month, we’ve gotten into the habit of looking at the monthly sector performance over the previous month and using seasonals to show us “where to look when” for the month ahead. Here are the sector returns for May, courtesy of our TradeSmith Platinum-exclusive dashboard: 
Technology led the way in May, with a 10.77% rise through the month. Closely following was Industrials and Cyclicals. The two sectors to lose money in May were Energy and Healthcare. Looking ahead, here are the seasonal returns by sector for the month of June: 
It’s not the prettiest sight. Only 6 of the 11 SPDR sector ETFs have a track record of trading positive in June. And the top two best win rates are in relatively new ETFs, XLRE and XLC, so the data is less consistent. For me, the best bet for June seems to be tech – at least from a momentum perspective. And especially since at least one big tech name, Tesla (TSLA), has strong seasonal returns through the June window. (I shared a bit about this on my X account, follow it here.) As ever, let’s drill into the XLK ETF and see which of the top 10 components has the best June track record: 
(Since we last ran the seasonals on XLK, the top 10 composition has changed with Accenture (ACN) leaving and Palantir (PLTR) joining. Though I should mention ACN has one of the strongest June track records of any S&P 500 stock, not just tech. That’s also on my X account.) Palantir comes in strong with a 100% win rate and an average trade of 10.87% for the month of June, but only four years of track record. There’s no denying PLTR’s momentum, but we should also look closely at ServiceNow (NOW) and Broadcom (AVGO), both with a bit of a longer track record. NOW has been up 75% of the time in the last 12 years, for an average return (wins and losses) of 4.47%. AVGO also posts a solid return, up 73.3% of the time and returning 3.56% on average. Nvidia (NVDA) has actually been positive in June less than half the time. But it’s also worth noting that, when it is positive, it has the highest positive return of the group at 11.92%. Meanwhile, Netflix (NFLX) not only has a seasonal tailwind through mid-July, but is enjoying a confluence of bullish signals throughout TradeSmith, as our CEO, Keith Kaplan, highlighted on X Thursday (follow him here): 
Long story short, you want to be selectively long tech in June despite the overall poor performance of the month. Here are some other strong stocks to consider… Another ritual here in TradeSmith Daily is to pore over the top-ranked stocks of our quant master, Jason Bodner. Jason’s purpose-built system ranks stocks based on two key power factors: strong earnings growth, and institutional support. Each week, he sends the top- and bottom-ranked stocks to his subscribers. The latest list will hit inboxes this afternoon, so in the meantime, let’s see what was hot last week: 
Palantir (PLTR) ranked #1 last week with a Quantum Score of 87.9 – indicating both sublime fundamental and technical strength. As Jason mentioned last week, education stocks are of big interest to institutions right now. Laureate Education (LAUR) ranks third, behind cash-advance-focused digital banking service Dave (DAVE). Another great name is Paycom Software (PAYC). Since that name first appeared on the Quantum Edge Hotlist back in November, it’s up about 24%. You can get on the list for the next one and learn all about Jason’s system by clicking here. DOGE has been fun, but let’s be real… I’ll admit, I got a little starry-eyed earlier this year when it seemed like the incoming administration was going to be serious about austerity and cost-cutting. Those dreams got smashed by the new tax bill making its way through the Senate. The system has thus far proved too big for DOGE to take on. It initially set a goal of eliminating $2 trillion from the federal budget. Then, that estimate shrunk to $1 trillion. And then again, it shrunk to $150 billion – conveniently just a stone’s throw south of its claimed savings so far of $175 billion. The OBBBA (One Big Beautiful Bill Act) is estimated to cost $3.8 trillion over 10 years assuming a debt service cost of 3.6%. Even that is enough to completely undo DOGE’s efforts. With a more realistic debt service cost in the neighborhood of 5%, going off the longer end of the Treasury curve right now, it’s even more costly. Clearly, austerity is of no genuine interest to this admin outside of campaign promises. So what’s the alternative? Run the economy hot and grow your way out… Like much of this White House’s moves, it’s a high-risk gambit. But with so little interest in Congress for supporting anything but more spending, it’s the only option. Here’s what that means for you… It’s time to get serious about investing where the White House has set its sights – chiefly AI, robotics, and energy. And it’s time to understand that cutting the red tape surrounding all of these themes is the big move. As such, consider ditching the losers of “Trump 2.0”… and redeploying that capital toward Tech Liberation, Tax Liberation and Energy Liberation policies the administration’s working on now. Go here for the full story, including a free stock pick to get you started from Louis Navellier of InvestorPlace. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
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