New Highs in the Market Indexes
It is very unusual for the market to have consecutive monthly gains in the summer months. Usually, market setbacks and monthly declines occur. There have only been 11 occurrences where the market has been positive April through July. August adds another month to the string. This string of gains could be a bullish indicator. Following each of these 11 instances, the market rose through year-end by an average of 10.7%. This portends a promising finish for 2018.
The prevailing condition of the markets certainly supports this. August has been a surprisingly strong month. It is NOT typical since August and September are historically very shaky months for the stock market. In August, stocks have accelerated to the upside and the S&P 500 finally made a new all-time high overcoming the January high point.
The S&P 500 now sits 1% above its January 26 closing high point. Stock market technicians believe it is bullish when the market moves sideways for many months and then breaks out of its range. This is another favorable consideration for further gains for the months ahead.
Sometimes, historical patterns and precedents can be accurate predictors. Since World War II, the median average number of days for the market to recover following at least a 10% drop is 208 days. This actually includes the rare periods when the market fell over 50% and took years to recover. Sure enough, this year, as if guided by some sort of manipulative formula, the S&P 500 took 209 days to recover from its January 26th high point. Historical probability was off by just one day!
Maybe the stock market is becoming more predictable, after all.
(Market data provided by Bespoke Investment Group www.bespokepremium.com)
The recent strength in the stock market gives consideration to remarks from the billionaire hedge fund manager, Paul Tudor Jones. In June, Jones pointed to a potential melt-up in the market fueled by a combustible mix of fiscal and monetary stimulus. As a result, he predicted: “I can see things getting crazy, particularly at year-end, after the midterm elections. I can see them get crazy to the upside.” (Financial Review 6/13/18)
One area that has caught my attention has been the video game industry. The industry continues to expand at a rapid pace with a wide array of additional content and applications. It has now spawned a whole new industry of e-sports complete with lucrative award purses with endorsement and revenue channels. We have started to make investments in this sector.
Below is a link to a fascinating article which describes this burgeoning new sport.
Peregrine Asset Advisers ● 9755 SW Barnes Rd. Suite 295 ● Portland Oregon 97225
503.459.4651 ● 800.278.1420 ● www.peregrineaa.com