Are markets entering a period of seasonal weakness, or does expanding breadth and global leadership point to continued strength? In this week’s webcast, we examine Powell’s policy shift, rare 90/90 breadth signals, and leadership from banks, gold, and global equities that suggest the bull market case remains intact.
Key Points:
Structural Bull Market Intact
- The S&P 500 is up ~1.7% in August, marking the fourth consecutive monthly gain (May–August).
- Despite seasonal weakness often seen in August/September, markets have remained remarkably resilient.
Fed Pivot Toward Easing
- At Jackson Hole, Fed Chair Powell acknowledged risks to employment and signaled that inflation is nearing target. (questionable)
- Markets now expect a rate cut in September, which supported Friday’s sharp rally.
Breadth Signals Turning Positive
- Friday was a rare 90/90 up day (90% of NYSE volume up, 90% of stocks higher).
- Historically, these signals have led to strong forward returns (e.g., average +5.3% one month out, +23% one year out).
- The Russell 2000 rallied ~5% on Friday, a sign of improving small-cap participation.
Global Leadership Emerging
- MSCI ex-US, Eurozone, Japan (TOPIX, Nikkei), Singapore, and even Shanghai are all outperforming the U.S. in recent months.
- Over 50% of Shanghai 300 stocks hit 20-day highs, consistent with early bull market phases.
Financials Leading
- Global banks remain strong beneficiaries of the widening 2-year vs. 30-year bond yield spread.
- 100% of bank stocks are above their 50-day moving average.= excellent breadth
- Canadian banks are showing strength: BMO earnings beat estimates by ~9%, driving the stock up ~5% in a single day; management also announced a 30M share buyback.
Commodities and Materials Strength
- Gold has resumed its uptrend; gold miners (Agnico Eagle, Kinross, Alamos Gold) are outperforming the metal itself.
- Copper producers are rallying: the copper ETF is up ~13% in August; Hudbay (HBM) is advancing after new financing for its Arizona project.
- Cash flow from miners is exceeding expectations, with energy prices (their main cost input) staying weak, further boosting margins.
Nvidia and the AI Trade
- Nvidia (NVDA) earnings expected Wednesday after the close. Options imply a ±5% move.
- Customers (Amazon, Google, Meta, Microsoft, CoreWeave) all report GPU demand vastly outstripping supply, reinforcing Nvidia’s positioning.
- Nvidia maintains dominance not just in training but also in AI inference, outperforming competitors like AMD.
Positioning and Risk Outlook
- Barometer portfolios remain overweight financials, industrials, and materials with an underweight in tech, consumer staples, healthcare, utilities, REITs, and bonds.
- Holding ~5% cash as a defensive buffer heading into fall.
- Breadth is improving: average % of stocks in uptrends rose from 45% at start of August to 48% now.
- Volatility (VIX) remains within normal structural bull market ranges.