In a recent seasonal report, Bank of America (referred to as BofA) stated that August to October has historically been the weakest period for the S&P 500 index performance, advising investors to be cautious and consider hedging. Some investment experts also mentioned that there is a 40% risk of a pullback in the S&P 500 index.
According to BofA, based on market data from the past few decades, August to October has been the weakest three months for the performance of the S&P 500 index, indicating a need for investors to stay vigilant.
Data from the report shows that since 1928, during the period of August to October, the S&P 500 index has only seen an increase in 55% of the years, with an average return close to zero. It also experienced the deepest pullback among all three-month cycles, averaging at 7.35%.
The report also mentioned that seasonal weakness does not necessarily indicate long-term bearishness. In history, pullbacks often set the stage for subsequent strong market performance, with the S&P 500 index seeing an average increase of 3.54% from November to January in the following year. Moreover, not all indices face the same level of seasonal pressure. Historical data indicates that the Dow Jones Industrial Average is most resilient in August, with a 62% probability of increase and an average rise of 0.86%.
The report highlighted that historically, the US dollar and gold have often shown strong performances during the same period.
Among developed market currencies, the US dollar against the British pound and the Australian dollar have particularly standout performances. Since 2000, the US dollar has appreciated against the pound in August around 65% of the time, with an even higher likelihood of appreciating against the Australian dollar at 69%.
Within major macro assets, gold is one of the most clearly beneficial instruments during this period. From 1992 onwards, gold has seen increases in 61% of the years from August to October, with an average rise of 2.52%.
Ted Oakley, the founder and managing partner of Oxbow Advisors, recently commented on the “Julia La Roche Show”, stating that the current level of the S&P 500 index is about three standard deviations higher than normal, suggesting a potential need for a 40% to 45% decrease just to return to the average value.
He also mentioned that approximately 10 to 12 companies occupy nearly half of the weight in the S&P 500 index, with semiconductor-related listed companies having a significant presence, indicating a surge in speculative sentiment in the capital markets.
This week remains the peak period of the US stock market earnings season, with over a quarter of the S&P 500 component stocks set to report their earnings, including industry giants such as SpaceX, AMD, SanDisk, Western Digital, etc., which will influence the performance of the indices in the short term.
After the market closed on August 4th (Eastern Time), SpaceX is set to release its first quarterly report since going public, making it one of the biggest highlights of the entire week in the US stock market. Market expectations for the revenue from “Starlink” (high-speed internet access service provided by a low-orbit satellite constellation) and the commercialization of “Starship” (a fully reusable super heavy-lift launch vehicle) continue to rise. On August 6th, SpaceX will face the unlocking of $116 billion in restricted shares, setting a record for the largest single stock unlocking in US stock market history, which will pose significant pressure on both SpaceX’s stock price and the overall market liquidity.
According to Bloomberg’s report, the Federal Reserve’s (Fed) actions are an important factor affecting the stock market. Following the recent press conference after the Fed’s interest rate meeting, Fed Chair Kevin Warsh expressed his desire for the market to guide the Fed.
As per the schedule, the US July non-farm payroll report is set to be released on August 7th. The non-farm payroll data and the unemployment rate will have a significant impact on the Fed’s subsequent monetary policy path. Market analysis suggests that the situation of job creation will determine the market’s pricing of the September interest rates. If the non-farm payroll data continues to weaken, it will strengthen the market’s expectation of a dovish stance from the Fed.