Folks, if you're invested in tech stocks, then it's time to buckle up... We've watched the major indexes trend sideways or even slope downward over the past three months.
This Is the Worst Month for Stocks
By Ethan Goldman, analyst, Chaikin Analytics
Folks, if you're invested in tech stocks, then it's time to buckle up...
We've watched the major indexes trend sideways or even slope downward over the past three months.
At first glance, the AI trend appears to be slowing down.
I'm sure our readers understand this paradox well. You may even draw comparisons between the dot-com boom and the current AI megatrend.
Of course, there's good reason to do so.
If you've forgotten what happened during the dot-com boom and bust, I'll refresh your memory...
In the 1990s, vast amounts of money moved into tech stocks, sending valuations sky-high. The tech-heavy Nasdaq Composite Index ballooned from less than 1,000 to 5,000-plus in five short years.
These nosebleed valuations didn't last long. Many of the companies involved couldn't turn a profit as promised and shut down.
This led to a market crash – and the Nasdaq shed about 77% of that inflated value in two years.
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It's Not a Surprise These Funds Are Lethargic Today
As of today, the broad-market State Street SPDR S&P 500 Fund (SPY) has barely moved over the past three months. And a tech-heavy Nasdaq 100 Index fund – the Invesco QQQ Trust (QQQ) – has lost 3% of its value.
I don't see this trend reversing during September. In fact, this is pretty typical...
You see, I took a look at the historical monthly performance of these two market indexes over the past 20 years.
And it turns out we're in a period of expected weakness right now. In both ETFs, a clear pattern emerged.
On average, over the past two decades, both funds struggled during the month of September. In fact, it's the weakest month of the entire year for investors.
In SPY, the average September loss is 0.8%. June is the only other month when investors can expect to see a slowdown – and even that average "loss" is barely worse than breaking even.
For QQQ, the downturn averages to 0.4%. Sure, that's less than SPY, but it's the only month with a negative average.
Folks, this average September downturn could be due to any number of reasons. It's not important to understand why this happens...
It's important to recognize the trend. Investors paying attention to seasonality analysis know to hunker down and trade cautiously.
Now, I'm not saying that fear of superintelligent AI or investor angst over rampant capital expenditures doesn't matter. They just may not be the biggest reasons behind the market's underperformance right now...
Today, the Power Gauge gives both SPY and QQQ a "neutral" rating. That tells me we're not in danger of an immediate crash – yet. But there are better ways to grow our wealth than with one of these ETFs right now.
Folks, it's important to remember that the AI boom won't last forever. But I don't think the megatrend is over yet.
Put simply, there's a chance the markets rally after this expected bout of seasonal weakness.
Good investing,
Ethan Goldman
Marc Chaikin is speaking at our corporate affiliate Stansberry Research's upcoming 24th annual conference in Las Vegas. And he would love for all his readers to see his presentation...
— According to the Chaikin Power Bar, Large Cap stocks are more Bearish than Small Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Communication
+1.96%
Health Care
+0.71%
Staples
+0.34%
Real Estate
-1.38%
Industrials
-1.79%
Energy
-1.96%
Financial
-1.98%
Materials
-2.00%
Discretionary
-2.03%
Information Technology
-2.10%
Utilities
-3.77%
* * * *
Industry Focus
Insurance
24
26
3
Over the past 6 months, the Insurance subsector (KIE) has underperformed the S&P 500 by 0.41%. However, its Power Bar ratio which measures future potential is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #5 of 21 subsectors and has moved down 1 slots over the past week.
Top Stocks
AFG
American Financial Group, Inc.
AIZ
Assurant, Inc.
ALL
The Allstate Corporation
* * * *
Top Movers
Gainers
LITE
+9.59%
COHR
+6.92%
AXON
+5.96%
GEV
+4.79%
EW
+4.13%
Losers
JBHT
-13.30%
ON
-9.02%
FANG
-8.03%
OXY
-6.55%
TPL
-6.21%
* * * *
Earnings report
Earnings Surprises
LEN Lennar Corporation
Q3
$1.23
Missed by $-0.06
* * * *
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This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.
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