The momentum trade picked up steam again in August after falling out of favor in July, spurred on in part by a blowout earnings report from Nvidia that suggested continued high levels of demand for the company’s chips. The August market rally took place despite bearish sentiment from retail investors, which could provide a potential tailwind for this rally to continue as tides turn. Overall, our Momentum Dial remains in a Positive position.

Despite a period of below-average job creation, the labor market continued to show remarkable resilience in August when unemployment claims came in below 200,000 for the third consecutive week, the longest such stretch since 1969, when the labor force was roughly half of what it is now. Meanwhile, the domestic manufacturing sector has now expanded for eight consecutive months despite price pressures and a struggling consumer. As such, we’re moving our Fundamental Dial from Negative to Neutral as we continue to expect low but steady growth.

The recent AI-driven surge has lifted tech sector concentration in the S&P to nearly 40%, dwarfing its peak during the dot-com bubble. Despite another strong quarter for earnings and bullish guidance, stretched P/E ratios at the top are still a cause for concern, and thus our Valuation Dial remains Negative.