Lately, stocks have exhibited extraordinarily low volume as they have grinded higher.
Meanwhile, the volatility index (VIX) has fallen to five-year lows, which has left analysts wondering if complacency has set in.
Perhaps all of this means September will be more interesting.
Citi’s Tobias Levkovich writes that historically September is an underperformer. And there are some reasons why. From his latest note to clients:
September historically has not been kind to the stock market. A review of monthly index performance shows that despite two market crashes in October, the worst typical month for stocks has been September when looking back 60+ years. The explanation may be that the third quarter is less predictable than other quarters due to summer vacation-related corporate sector downtime in the US and Europe (during July and August, respectively) leaving it more dependent on the only full month of business activity which makes accurate forecasting inherently more difficult.
Photo: Citi Investment Research & Analysis
Nonetheless, Levkovich continues to believe things look good for stocks through the balance of the year.
When assessing all of the inputs, there is reason to believe that the major US market index could overshoot the 1,425 objective, potentially running up to 1,500, but that may require a more pro-business result on the morning of November 7th which is far from certain. As such, some pause is probable in the near term but this should not be perceived as a reining in of bullish horns; rather it should be viewed as a short period of consolidation. In the interim, the dividend theme continues to be appropriate.