The S&P 500 (^GSPC) is up about 14% year to date and the VIX is at multiyear lows, suggesting investors are confident that central banks will step in with more stimulus if the global economy weakens.
The last week of August is typically slow with thin trading volume, but investors will be on the lookout for hints of further easing from the Federal Reserve and European Central Bank.
“Unfortunately, many investors failed to participate in this summer’s rally, conditioned by the shared experience of the past two summers. Indeed, for the last two years, the S&P 500 has topped out in the spring and then slid into the summer doldrums,” writes Raymond James strategist Jeff Saut, at Minyanville. “Accordingly, many professional investors were too timid to believe the June 4 low was the daily, and intermediate, term cycle-low, which launched this year’s summer rally. Now they are faced with performance anxiety as the end of the third quarter looms. Yet investors are still skeptical, voicing concerns about Euroquake, a slowing China, our dysfunctional government, the fiscal cliff, etc.”
September and October traditionally are weak months for the stock market, so many investors are already looking ahead to the fall and what may happen after Labor Day.
The excerpt below is from a Monday note from JP Morgan Funds chief global strategist David Kelly on what investors should expect in coming weeks: