INVESTMENT MANAGEMENT

After flirting with a correction in the first week of trading, August’s strong rally off the lows suggests that technical support is very much intact for the current uptrend. However, headwinds include overly bullish individual investors and the looming “September Effect”, as September has historically been by far the worst performing month for stocks.

On balance, our Momentum Dial remains Positive despite the potential for volatility ahead.

Dollar General became the latest company to cite a financially constrained consumer as it missed Q2 earnings expectations, with its core lower-income customer base feeling particularly burdened by high-interest credit card debt. Meanwhile, pending home sales dropped to their lowest level on record as potential homebuyers wait for clarity on interest rates and the election.

Due to these persistent economic challenges, our Fundamental Dial remains Negative.

Perhaps no company exemplifies the current environment of stretched valuations like AI-darling Nvidia, which beat Wall Street expectations on both sales and earnings for Q2 while guiding future revenues higher. Still, the stock fell after their report, perhaps due to investors recognizing a potential ceiling on the company’s meteoric rise.

With broad price-to-earnings ratios well above average, our Valuation Dial remains in a Negative position.

Our composite Three Dials reading remains in a Moderately Defensive position through the most recent month-end, with two dials Negative and one dial Positive.