Although we are only two months into 2026, the remainder of this year is already coming into view. And based on what I can see, it’s starting to look messy.

It isn’t one thing that is the problem. If it were, then solving that would be easy.

If inflation is running too hot, then raise interest rates. If job growth is too slow, then cut interest rates.

According to the most recent government data on retail prices and jobs, inflation is heating up while the unemployment rate is going down. In that trend continues, then raising interest rates makes more sense than lowering them.

However, that logic is contrary to the wishes of the White House which has made clear its desire to see the Fed reduce interest rates. That probably won’t happen while Fed Chair Jerome Powell remains in office, but his term expires this May.

After that, a new Fed Chair nominated by the Trump administration will take over. Regardless of whether that person is Keven Warsh or someone else, there will be immediate pressure to start cutting interest rates.

Fed Chair in the Hot Seat

According to people who know him well, Kevin Warsh is not the type of person that can be pushed around. Neither is Jay Powell, which is why the Trump administration pilloried him in public and threatened to indict him on criminal charges that appear to be tenuous at best.

Cynics say that Powell’s rough treatment is a warning to the next Fed Chair. If you want the job, then do as you are told.

Unfortunately for the incoming Fed Chair, that transition will take place six months before this November’s midterm elections. By then, inflation may be heading down while unemployment is going up.

If that is the case, then cutting interest rates is an easy decision. But if the opposite is true, then cutting rates could trigger a major stock market correction if inflation starts growing at an accelerating pace.

That is the scenario that has caused me to seriously consider adhering to the Wall Street adage to “sell in May and go away” this year. It is based on the widely held belief that stocks tend to underperform over the summer and then rally in the fall.

Supreme Difficulty

Normally, I would not advise getting out of the stock market due to seasonal patterns. Although they tend to hold true over the long run, they are unpredictable in the near term.

Had you exited the stock market at the end of last May, you would have missed out on a 9 percent gain over the summer (as measured by the S&P 500 Index). The previous year, skipping June through August would have cost you 8 percent.

I believe this year could be quite different in that regard. Not only we do we have a new incoming Fed Chair who will be under a lot of pressure to cut rates whether it makes sense to do so or not, but the Supreme Court of the United States (SCOTUS) just handed the Trump administration a stinging rebuke of its trade tariff policy.

In response, the White House invoked an across-the-board 15 percent import tariff that expires in 150 days. That gets us into late July, only four months before the midterm elections.

Summer Sale

To be clear, I am not expecting the stock market to crash. However, a correction in the 10 percent to 20 percent range would not surprise me.

From a long-term perspective, that type of event is not unusual. Nor is it necessarily deleterious to long term performance.

Over the past three years while the S&P 500 Index delivered a total return of 80 percent, it experienced two corrections of more than 10 percent. In addition, there were numerous drawdowns of at least 5 percent.

For that reason, I don’t advise selling all your stocks. Good companies at reasonable valuations will quickly rebound once the crisis has passed.

However, I’d be careful about hanging onto large cap stocks trading at high multiples to sales and earnings. Those are the ones that Wall Street will dump first if things start to go sideways (if you don’t believe that, take a look at NVIDIA’s stock chart last week after the company reported blowout results).

But if you have cash on hand, this summer may be an opportune time to add new positions to your portfolio. A 20 percent decline requires a 25 percent recovery to recoup that loss.

In that regard, perhaps the saying should not be “sell in May and then go away,” but “buy in July when fear is high.”