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In my last market update email sent in early August, I spoke about and shared charts on how we could possibly expect an increase in volatility and/or a summer selloff.
I specifically mentioned that if we do not see “history repeat” via a market selloff in a historically seasonal weak period that we can (and should) use that information as a research note and reason for conviction. At that time no one knew where the market would be exactly a week or month later – so far, it’s only traveled up. In fact, today the market reached a new all-time high after posting a near 2% return in the S&P 500 in August. Through yesterday’s close the market is now up over 11% for the year.
Despite all the noise (which there has been plenty of) and the real news that has the potential to impact economics and fundamentals of the companies we own via their public stock, the market has taken a Seals and Croft tune to heart in "Summer Breeze (Makes Me Feel Fine).”
With summer in our past and cooler temperatures ahead, we can put the real time evidences of market strength to work as we forecast for the next season. Not only did the market rise, but there has been a great deal of market breadth via widening and participation in stocks during the recent rally. Technology stocks and the AI-related companies are still doing well, but so are the most interest rate sensitive companies like those in energy, real estate, and healthcare. For example, in the last 30 days a few key winners/growers have been: Eli Lily, Bank of America, Dupont, Toll Brothers, Marathon Petroleum, Cigna Group. The prospects of AI advancement (and effectiveness) alongside an expected rate cut from the Federal Reserve next week has brought out the growth and value centric bulls.
Speaking of bulls, would you guess that polls taken by individual investors in the U.S. (not professional investors or newsletter writers, they have their own polls), are feeling more bearish than bullish – even with the August boost and breadth of the market?
In fact, per the AAII “Bearish sentiment, expectations that stock prices will fall over the next six months, increased 3.9 percentage points to 43.4%. Bearish sentiment is unusually high and is above its historical average of 31.0% for the 40th time in 42 weeks.”
For more on this topic, please see their website and commentaries at the link below.
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