August Markets Hurt Investor Optimism

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,” 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.

To profit on the downside in the short term, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS). SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.

On the flip side, when the S&P 500 rises, traders can play to the upside with the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). Both ETFs offer thrice the leverage, so only seasoned traders should use these products.

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