ME News reports that on August 5 (UTC+8), U.S. equities, after reaching new all-time highs, are entering a historically weak seasonal period. According to Ned Davis Research’s (NDR) cycle model, August through October are typically the three weakest months for the S&P 500 over the course of the year, prompting investors to assess whether the market faces a potential short-term correction risk. However, NDR believes seasonal factors alone are insufficient to alter the current market trend. The firm notes that investor sentiment remains cautious, market breadth has improved, and asset allocation models continue to favor equities. NDR’s current model recommends allocating 70% of assets to stocks, above the benchmark level of 55%. Fundamentally, corporate earnings continue to support U.S. equities. To date, approximately 300 S&P 500 companies have reported earnings, with 85% exceeding expectations; overall profit growth is projected to exceed 47%. NDR believes that as long as the U.S. economy remains resilient and AI-driven investments continue to fuel corporate earnings growth, U.S. equities still have room to rise. Market sentiment is also providing support for the rally. NDR data shows that short-term trading sentiment dipped into “extremely pessimistic” territory in early August but has since rebounded to neutral levels. Historical patterns suggest that extreme pessimism often signals that selling pressure is nearing exhaustion, potentially triggering renewed capital inflows into equities. Meanwhile, AI-related trading is regaining momentum. As large technology stocks rebound, investors are repurchasing call options, and market makers are buying stocks to hedge their positions, further reinforcing a positive feedback loop. However, market concerns are accumulating. Recently, a rare phenomenon has emerged: simultaneous increases in both the S&P 500 and the VIX volatility index. On Tuesday, the S&P 500 rose 1.8%, its largest single-day gain since April, yet the VIX index also climbed 2.9% to 16.47. Analysts warn that if the combination of rising equities and rising volatility persists, it may signal that the market is approaching a critical inflection point. Overcrowded AI trades, elevated options positioning, and high valuations could amplify market volatility in the event of a sentiment reversal. (Source: BlockBeats)
U.S. stocks face a seasonal risk window as August to October becomes a key test period.
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Summary
Ned Davis Research highlights a seasonal risk window for U.S. stocks, with August to October emerging as a key test period. Despite this, 85% of S&P 500 companies have exceeded earnings estimates, supporting the current trend. The firm recommends a 70% allocation to stocks, above the 55% benchmark. Analysts note that rising prices and a declining VIX could signal increased risk appetite. Traders are advised to monitor altcoins as market conditions evolve.
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