Date: August 2, 2021

August Has Not Been Kind to the Bulls

Seriously, how can we be into August already? 2021 is flying by at warp speed and I am not liking it! It needs to slow down Kemosabe. I need some time to breathe, smell the flowers and catch up. I had an extra hour of time today as my wife and I drove home from Lyman Orchards after a quick peach and blueberry pick. Right after we passed the exit before ours, traffic ground to a standstill with four miles to go. It took over an hour to get to our exit as yet another accident on the Wilbur Cross occurred. I even tried to get into the breakdown lane and put it in reverse, but we were too far ahead.

Historically, August has not been one of those kind months to stock market investors, having a barely flat track record regardless of whether the month began in an uptrend or downtrend. Think 2015, 2011, 2010. It’s also super important for September’s performance, but we will cross that bridge in four weeks. Suffice it to say that the S&P 500 needs to remain in an uptrend into September or that will draw in lots of negative scenarios.

Stocks begin the new week having gone nowhere last week with the worst day on Friday. Although the new month usually brings buying, the first day of August is the weakest first day of the month of the year. If Friday wasn’t a down day I would give much more credence to beginning the month in an underwhelming fashion.

In January I forecast that stocks would peak by Labor Day and then see their largest decline since at least October. Given that Labor Day is only a month away, I am sticking by a peak this month with weakness into September and on. However, I do not see any confirmation just yet and I do not believe the bulls have exhausted themselves. That could be coming this month. August is going to be a very interesting, telling and important month.

Last week, I sold our position in small caps and the Dow Industrials and bought more NASDAQ 100 as well as mid cap value. I also sold banks and transports in favor or more semis, energy and industrials. I had much activity on the stock side, but I can’t recall it all as I type this. I try to tweet everything on the same day so feel free to follow me on Twitter if you want that info.


Paul Schatz, President, Heritage Capital