Lin Liu
Lin Liu
Austria
10mo
Edited
August Update The S&P 500 has already hit 18 new all-time highs this year. All-time highs are very positive. Few signals are more bullish than that. And it’s not just the index that’s at another high. Profits for companies in the S&P 500 also reached a new record last quarter. That’s why stocks keep pushing higher. Earnings season is pretty much over for now. The top three stocks, Nvidia, Microsoft, and Apple, together now make up over 21% of the S&P 500. That’s the highest share ever for just three companies. This concentration in a few names worries a lot of investors. But here’s what most people miss: profit margins are higher, revenues are growing faster, and these are some of the best names in the market. Why would you want to own anything that’s worse? The market continues to climb higher, and there’s no reason to think this bull market will end anytime soon. But markets don’t go up in a straight line. Don’t be surprised if we see more volatility going forward. This is the time of year when volatility usually picks up. A pullback or a bit of consolidation would make sense before we move into the strongest season of the year. That's why we're holding a good amount of cash to take advantage of the pulllback As I’ve been noting for a while, I wouldn’t be surprised to see a correction or at least a period of consolidation. That means it’s not the time to be overly aggressive, but to stay patient and prepare for the next set of opportunities. We’re also entering the most difficult seasonal period of the year. September in particular is known for being the worst. Although seasonality is less favorable over the next few weeks, it’s very unlikely we’re at the top. Since 1980, the S&P 500 has only peaked in August once. So while pullbacks should be expected, worrying about buying right before the top usually isn’t worth the stress, as long as you’re prepared for some market volatility. The Nasdaq is also following almost exactly what it did in the mid-1990s. Since the low in December 2022, it’s up 106 percent, very close to the 111 percent gain it had over the same stretch in 1995. Bull markets last an average of 4.3 years. We’re only about 2.5 years in. So the bull market could definitely go on for a little longer.
Not investment advice. The author may have financial interests in the mentioned instruments.
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