Stocks broke a five month winning streak, closing the month of August with a small decline.
- The S&P 500 (SPY) fell 1.7% in August.
- The Dow Jones Industrial Average (DJ) fell 2.5%.
- The tech-heavy NASDAQ 100 (QQQ) fell 2.2%.
Why Were Stocks Down?
I see two primary reasons stocks fell in august.
S&P 500 was over bought: U.S. stocks are having a great year with the S&P 500 recently posting five consecutive winning months. After the great run, the S&P 500 was a little overbought and needed to take a breather.
Seasonal weakness in August and September: August and September are historically two of the weakest months of the year for stocks. Take a look at this chart below.
What to Expect Looking Forward
Looking forward I’m expecting some more short-term volatility in September. But beyond that I am optimistic on stocks and I expect a strong finish to the year.
Better economic growth: Earlier this year the consensus opinion was a recession in the U.S. in 2023. But now, analysts are predicting that the U.S. is going to avoid a recession in 2023 and its giving stocks a boost.
U.S. will avoid recession in 2023 despite rate hikes
Better inflation data: The terrible inflation from the last two years continues to subside. This is always a tail wind for consumer spending, the economy, and stock market.
U.S. annual inflation posts smallest rise in two years
Seasonal strength in stocks: stocks have a history of doing well in October, November and December.
And finally, history shows that 2023 is setting up for a strong finish. Take a look at the study in the tweet below from well-respected analyst Ryan Detrick,
I View Weakness in Stocks as a Chance to Deploy Cash: Based on history and the study above, I view weakness in stocks as an opportunity to deploy cash. And that’s what I will be doing as an advisor in September – I will be looking to deploy more cash into stocks on weakness.
I’ll be back with another update next week – have a great day!
Disclaimer: This is not investment advice. This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
