We’re waiting for the FOMC to green light rate cuts, especially after better than expected results out from $AMD and the subsequent rally in the $SMH. Today’s +5.9% rally in the semis is a lot indeed, but not enough to negate the damage that was done in July. Overall the index is still lower by 6.9% for the month. The NASDAQ, barring a massive late day rally, will also close lower by about 2% for July.
It was a bad month for some, very good for those contrarians who bought the banks and the small caps. The Russell is higher by nearly 11%, $XLF +6.8% and the Regional Banks are up a staggering 19% for July. In other words, we are still very much in a bull tape, in spite of all of the doom and gloom broadcasted via the news.
Valuations aside, the recent downside in the markets were not supported by a fundamental concern. There was that $AMKR miss and collapse and the fear that maybe the semis had topped in their business cycles; but you can clearly see markets are NOT pricing that in today, post earnings in a number of companies.
Heading into August, I expect a mixed month, nothing to grandiloquent. We are in an election season and promises are being made and neither candidates offers dramatic change in the status quo, but simply a matter of optics and whether you’d prefer to hear a cackling Jamaican ramble on endlessly about coconuts or an aging tycoon talk about how wonderful he is and what a great job he’s doing for the country, while playing golf all day.
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