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Will May make eight straight months of gains for the ASX 200?

A happy smiling kid points his fingers up, indicating a rising share price
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The S&P/ASX 200 Index (ASX: XJO) is edging higher today, up 0.45% in afternoon trading. With a small gain posted by yesterday’s closing bell as well, the ASX 200 is now up 0.64% for the first 2 trading days of May.

If the ASX 200 can maintain its positive trajectory for the month, May will mark 8 straight months of gains for the index.

April saw the ASX 200 finish up 3.5% for the month. That was its best performance since November, when the index gained a stellar 10%.

Now in these days of monster overnight gains — and some rapid losses — from the likes of GameStop Corp. (NYSE: GME) and Bitcoin (CRYPTO: BTC), a 3.5% gain over the month may not grab many headlines.

But remember, we’re talking about the 200 largest listed companies in Australia here. And with the investment philosophy of ‘slow and steady wins the race’ in mind, I’m happy to take a 3.5% monthly gain from the Aussie blue chips populating the ASX 200.

Aussie economy picking up speed

As the Reserve Bank of Australia (RBA) will highlight today, the Australian economy has performed better than government forecasts. Inflation remains low (meaning interest rates will too), unemployment levels are lower than expected, and the budget deficit is looking to come in at some $31 billion less than expected back in December. Though it’s still a doozy!

Along with increased consumer confidence, the rollout of the COVID-19 vaccines and rising house prices, Australia’s financial sector looks to be in far stronger shape than most analysts were predicting as 2020 ground to an end.

And that, along with booming commodity prices, could send the ASX 200 on to another month of gains in May.

Soaring commodity prices help boost ASX 200

The new commodity super cycle you may have read about looks to be well and truly underway.

Prices for metals from iron ore to copper are sitting at all-time or multi-year highs, while crude oil and even coal have come roaring back from their post pandemic lows.

If this continues pace, as many analysts predict, it should continue to offer a welcome tailwind for commodity shares.

And with the materials sector making up some 19% of the ASX 200 (as at 21 December), May could well usher in an 8th consecutive month of gains for the index. 

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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