The S&P 500’s uptrend is narrowing and could enter a period of seasonal weakness. August is typically a mixed month, so we’re adjusting portfolios with tactical positions in the tech sector given historical resilience in August.
Defensive positioning in utilities and healthcare were added as relative strength signals point to outperformance ahead of a volatile month. Cyclical sectors such as transports, industrials, and materials were reduced given weak seasonal data and price breakdowns, although we anticipate a rebound in November.
Economic growth is slowing led by weakness in the manufacturing sector and tighter monetary policy abroad. This backdrop has led to a decrease in inflation expectations and lower Treasury bond yields. Typically, in a mid/late cycle phase, choppy market conditions underscores the importance of downside protection.
S&P 500 Daily Chart
S&P 500 Seasonality
S&P 500 Volatility