Investor optimism could be taking a hit as recession fears are still swirling about in the capital markets. This could be contributing to a slow start in August, which is historically a tepid market month.
“The IBD/TIPP Economic Optimism Index for August fell to its lowest level in more than a year as recession fears waned but inflation concerns revived,” Investors.com reported.
Despite this, the S&P 500 is still up about 17%, which could keep spirits elevated and re-ignite another rally through the rest of the year. Furthermore, the IBD/TIPP Economic Optimism Index reading was actually at its lowest level since over a year ago, although it’s still relatively high.
“Now 49% of adults polled think a U.S. recession is at hand. That’s the lowest level since May 2022, but still high,” the report added further. “The number is down from 55% in July and 51% in June. The figure rose as high as 61% in October.”
Additionally, the CNN Fear and Greed Index scaled back to the the “Greed” level (as of August 8) after being in “Extreme Greed” territory a month ago. Nonetheless, as mentioned, the month of August is historically a slow month for the equities markets, as Barron’s noted.
Barron’s data from Dow Jones Market Data revealed that the Dow “gained an average of 1.1% in August, going back to 1896. The S&P 500 gained an average of 0.7% in the month, dating back to 1928, while the Nasdaq Composite gained an average of 0.4%, going back to 1971.”
“Trading volume is notoriously light in August as both Europe and many Wall Street executives go on extended holidays. So I expect some market consolidation in the upcoming weeks,” said Louis Navellier, chief investment officer at Navellier Calculated Investing.
Any Way the S&P 500 Goes
Market tailwinds could still result from fewer rate hikes heading into 2024. Whatever the S&P 500 does, traders have opportunities to play both sides of the index with leveraged exchange traded funds (ETFs) from Direxion Investments.
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