The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Backing off.
After Friday’s big gains, investors weren’t interested in continuing the party. Futures traded off modestly in the premarket and the S&P 500 opened down about 15 points. It slowly recovered to unch’d by lunch but only spent a tick there before re-weakening in the afternoon. Capital flow was incredibly light at 84% and news was unremarkable. The Treasury curve changed very little and the perception of the Fed’s rate path continues to expect a 25 bip cut on September 17th. The current market probability of that cut is 83%.
It's late August and investors don’t seem to want to do much. The big event was Chairman Powell’s dovish turn last Friday and the bulls and dip-buyers were vindicated *yet again.*
Today the bears got a bit of a win but I wouldn’t make too much of it. Things were quiet in the capital markets today and the investment landscape tilted in favor of the bulls on Friday. That tilt was not undone by today’s price action.
I don’t know how much interest investors have in chasing the tape higher right now. Maybe they need to come back from their summer vacations. Maybe the summer moves are made and we’re treading water effectively until September.
I think playing the tape from now to month-end won’t be very interesting but I do think that the bullish trend will resume in September.
The S&P is up about 9.5% for the year. We’re almost at a double-digit gain. Here are the price returns of the S&P 500 for the prior five years.
Investors almost certainly expect a minimum of 15% appreciation from the index this year, *if the bull market continues.*
That means the last four months of the year still have significant upside to deliver. I highly doubt that investor flows will reverse randomly in September.
It’s a silly premise, that bull markets *should* deliver double-digit gains. But that’s the perception of the investor community. And the perception will create the reality unless something radically changes.
So if some news item or geopolitical event *doesn’t* kill the bull market, we’re destined for new highs.
See you tomorrow.
-Mike
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