Stock Rally At Crossroads With Bad Month Rising
If you ask JPMorgan's Mislav Matejka, equities are a risky proposition right now. And not just because they're risk assets.
The complacency on display across stocks is "evident," he warned, describing a market trading without a "safety net" and still in thrall to animal spirits, like FOMO. "Positioning has increased," Matejka said.
That latter contention (about positioning) depends on which metric you consult and what time frame you're discussing. Discretionary investor positioning increased i
If September and October tend to be chancy months for stocks, why is it so?
I think it has something to do with full year consensus; a company can miss 1Q and 2Q while guiding to a 2H recovery, by the 3Q report it is too late to bet that 4Q will salvage the year, so if full year estimates are going to come down, that’s when it happens – either on pre-announcements in Sept or misses in Oct. That’s in “bad years”.
However, this year 1Q and 2Q reports were generally okay, 2023 estimates tended to hold or rise, and – subjective impression at best – management outlook and guides generally seem to be still-cautious (AI superstars aside).
If that’s true, and if economic winds don’t suddenly shift, then there should be few pre-announcements and more beat/raises than miss/lowers – which suggests a “good year”.
H’s chart shows “bad” and “good” Septembers. I wonder how often the market has had four consecutive “bad” Septembers – not often, I suspect.
Now, any seasonal pattern may be spurious, or due to systematic or derivatives or other factors way above my pay grade – the elephant I am vaguely groping, Mr Magoo-style, may be a bear after all.