Market at a Glance - 8/26/2021
By: Christopher Mistal
August 26, 2021
8/26/2021: Dow 35213.12 | S&P 44470.00 | NASDAQ 14945.81 | Russell 2K 2213.98 | NYSE 16694.32 | Value Line Arith 9562.68
Fundamental: Decelerating. Although the second estimate of Q2 GDP was revised 0.1% higher to 6.6%, estimates for Q3 are slipping. According to the Atlanta Fed’s GDPNow Forecast, Q3 growth is projected to be 5.7% as of its update on August 25 from 6.1% the prior week. Corporate earnings growth is also slowing as easy year-over-year comparisons fade into history. Housing and labor markets are cooling as the pace of gains in both are also moderating. Broad moderation across the economy as it continues to struggle to return to “normal” is likely to have a similar effect on equity market returns going forward.
Technical: Stretched. DJIA, S&P 500 and NASDAQ have all recently broken out to new all-time highs. However, momentum appears to be waning. Weekly and cumulative advance/decline metrics are still mixed suggesting the move to marginally higher new highs has occurred with limited participation. Historically as participation fades so has the rally.
Monetary: 0 – 0.25%. Fiscal and monetary policy both remain highly support, but for how much longer is the key question. Discussions of when and how the Fed will taper bond purchases are accelerating and some clarity may be given on Friday, August 27, when the annual Jackson Hole symposium takes place virtually due to the Delta variant’s seemingly unchecked spread. Any insights provided could have the potential to move the market in either direction and in a meaningful and significant manner.
Seasonal: Bearish. September is the worst DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 month. Average declines range from –0.4% from Russell 2000 to –0.7% by DJIA. In post-election years since 1950, September is still ranked no higher than #9 while average performance remains negative with only a modest improvement.
Psychological: Bulls retreating. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have slipped to 50.0%, their lowest number since May 2020. Correction advisors have increased to 31.5% while Bearish advisors have crept up to 18.5%. The ongoing retreat in bullish sentiment combined with a modest uptick in correction/bearish is encouraging, but overall sentiment is still at levels that call for caution.