A rating agency downgrade of Spain that came midday sparked the majority of the selling, but the market dropped off the beginning and never saw positive numbers all day. This May was the worst for the Dow Jones Industrials, surpassing May of 1962.

As Gil Morales highlighted in his recent commentary, this in turn is interesting because May 1962 followed President John F. Kennedy’s April 1962 address when he went after the steel industry for price fixing, sparking the sharp, brutal bear market of market of 1962 that finally ended in a capitulation panic in October, right at the time of the Cuban Missile Crisis.

Note that the current market break off the April peak occurred after the SEC filed charges against Goldman Sachs, which was seen as the first shot across the bow of the financial services industry, something which Morales compared and contrasted with 1962 in his recent reports

Dave Rosenberg articulated our thoughts on what this market has been…..”a meat grinder”. In Canada, the TSX index is actually virtually unchanged since September 16 – contemplate that for a second. This has been a meat grinder now for nearly nine months north of the border. You would have been better off just being long volatility, bonds and gold (a strategy, by the way, that has also worked for the past dozen years, since Alan Greenspan took the U.S. along the boom-bust path that typically follows periods of excessive policy ease and recurring financial bailouts).

As we leave the month of May we have a down trending market being negatively affected by issues all around the world. China’s potential real estate bubble, the Gulf oil disaster and its political attention affecting the industry…oh and of course the seemingly never-ending European debt woes!

With all that said, the markets (as history has shown) can and will turn when most investors least expect it. With so much current pessimism it reminds us that this a perfect example when the pendulum has probably swung too far in one direction and could make its move back to centre and beyond.

See the full PDF version of this month's commentary as well as the archive in our Market Info Section

• OUR DISCRETIONARY POSITIONS, PERFORMANCE & LOOKING AHEAD