Many analyst appear to be giving weight to the seasonality factors.
That's because the scars from the horrid events of 2008 remains freshly imprinted, as we pointed out in Gold As Our Seasonal Barometer
For instance this from US Global Investors,`` Even as the markets are moving higher and excitement builds, don’t get too carried away. Late-summer trading volumes are notoriously low and this year is no exception. On top of that, money supply data from the Fed indicates negative growth over the past four weeks and the past quarter, which is historically a negative indicator for the equity markets.
``The graph shows the average monthly returns of the S&P 500 since 1970, September is by far the worst performing month of the year with average losses of about 1 percent."
Or this from Early To Rise,
``Research from Georgia Tech: Over a 200-year period, 15 out of 18 stock markets studied posted negative returns in September. From 1970 to 2007, all 18 posted negative returns.
``Consider these facts:
-The last bear market for U.S. stocks began in September of 2000.
-That market hit its lows in September of 2002.
-The Lehman Brothers collapse happened in September.
-The crash of 1987 happened in October, but the decline began in September.
-And the worst month of the great depression? September 1931, when the market fell 30 percent."
Or this new crash alert from an expert who rightly predicted last year's crash. This from Telegraph's Ambrose Evans Pritchard (bold highlights mine)
``After predicting a torrid "relief rally" over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears.
"We are now in the middle of a parabolic spike up," he said in his latest confidential note to clients.
``"I expect this risk rally to continue into – and maybe through – a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September 'tipping zone', driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets."
``The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a "surge higher" in these gauges can justify current asset prices. Results that are merely "less bad" will not suffice.
``He expects global stock markets to test their March lows, and probably worse. The slide could last three months. "A move to new lows is highly likely," he said."
For all we know they could all be right.
But as we earlier wrote, the fundamental forces behind 2008 and today have been substantially different.
We don't see today's rally as a dynamic emanating from "economic recovery" but from inflationary dynamics.
Second given the acknowledgment by global authorities of the continued fragility of today's economic environment, they are likely to keep the monetary spigot open.
All those issued money from thin air from global governments compounded by the growth in circulation credit arising from the low interest rates worldwide has to go somewhere.
And that somewhere has been in stocks, commodities and Asian/EM properties.
In addition, instead of using the seasonal performances of stocks as the yardstick for predicting a major bear market for turbulent September-October period, I would offer a shift in perspective- the US dollar index as the locus point of a possible major selloff in September-October.
Hence, I would prefer to benchmark gold's seasonal factors as barometer for the stock market. See my earlier explanation here.
Finally we can't discount sharp volatility given the inflationary landscape, but it doesn't mean stocks would crash ala 2008.
