August was one of 2021's best months for investors. Five market analysts discuss what's next
After seven straight months of gains, what could lie in store for stocks in September?
Even if historically weak September plays out by the book, the market's record run is not to be ignored, five market analysts told CNBC on Tuesday.
Here's how they expect the coming weeks to play out:
Stephanie Link, chief investment strategist at Hightower Advisors, said September's softness may not derail the rally:
"I worry when I don't worry because that means we're complacent. And so, we still have uncertainties with delta, with Ida, with peak growth. I've been saying consistently we're at peak growth. We're at peak earnings growth. But we're going to be above trend. We're going to continue to grow. And I think that is supportive of solid earnings, double-digit earnings, and very solid GDP growth. Maybe it's not going to be 8, 9, 10% like we're seeing right now, maybe it falls to about 4% or so next year, but that's still very supportive, again, of earnings and of stocks, and that's why stocks are at highs. Look, September is always seasonally soft, August and September. And now we have the end of earnings and now we know the Fed wants to taper, so we have things to worry about. Let's climb that wall of worry and I think stocks go higher into the end of the year."
Ritholtz Wealth Management CEO Josh Brown said as long as Big Tech holds up, the rest of the market should, too:
"We have strategist after strategist come on … and they tell us that we're overdue for a correction and that there's going to be a 10% dip or big volatility. It's not a profound statement. On average, every 18 months, you get a 10% sell-off in the stock market. So saying that is like saying, 'Oh, it might be 75 degrees in San Diego today.' Yeah, we understand that. What I continue to point out is listen to these year-to-date returns: Facebook plus 38%, Google plus 65%, Microsoft plus 38% and now, [Monday], Apple finally breaks out to a new all-time high. Apple's only up — I say 'only' in air quotes — 15% year to date. As long as those four stocks, which represent 40% of Nasdaq, 25% of the S&P — throw in Nvidia, throw in a couple of others — as long as those stocks are holding up, everything that you hear is just feelings. It's just commentary. And that has been the case all year. So, what else do you want to talk about? Do you want to talk about divergences in the Russell 1000 Value? It doesn't matter. They're not big enough."
Liz Young, SoFi's head of investment strategy, also expects the market to scale the wall of worry:
"I do think September is going to be at best a pause in the rally and a lot of it is because there's no new good news coming. … We're kind of at this pause in earnings season. There's not a lot of news that's going to come out on earnings. I think earnings are great. Earnings are strong. Corporate America is doing really, really well. We're not going to hear a lot about it in September. What we do have, though, is the Fed dot plot on the docket. I feel like I'm the only one who's talking about that. It happened in June the last time. The market didn't like it because it moved rate hike expectations forward. I think there's a chance that that happens again in September. We also have this debate in Washington and the market doesn't usually like that, either. We've got the budget and we're forgetting, I think, too, to talk about the fact that we have tax hikes that would be included in that budget. I think that's part of why you saw the sentiment data get hit in August, because people are expecting tax hikes to come at the end of the year. So there are definitely risks out there. There are always risks out there, though. So what do you do in September about that? You use it as an opportunity to position yourself. … I don't know that there's a lot of people left with cash on the sidelines at this point, but if you have cash on the sidelines, it's an opportunity to position yourself, and we can talk about some of those trades later. But the last thing I would say about this is I think the bigger worry is about feelings. … It is about feelings and it's about the idea that we haven't seen a correction in so long, so we forgot what that looks like. And there are a lot of new investors in this market that have never seen a correction like that. So when it happens, it's going to test their conviction, it's going to test all of our conviction and we have to be able to hold on through it."
Pete Najarian, co-founder of MarketRebellion.com with his brother Jon, is watching the market's velocity:
"You look at volatility and it continues to drop back down and we can't sustain over 20. We jumped up towards 24 just a week and a half or so ago, and before you know it, we're back underneath 20, and now here we are once again right back at about that 16 level. So Jon and I are always talking about volatility. We're talking about volume. We're talking about velocity and those types of things. And the volumes are absolutely extraordinary right now in the derivatives markets. It's absolutely crazy. We're averaging about 35 million per day or 36 million per day in August. We've had a great year already and a great 2020 in terms of volumes just consistently being there, but we've had that velocity. … When we get moves, they are dramatic. But for the most part, they've been just sort of this steady-as-she-goes type of a thing."
Brian Belski, chief investment strategist at BMO, encourages investors to seek out opportunities:
"There's no doubt that market corrections were defined in September, but really bottomed out and finalized in October. … Say if you get a 5-8% correction, which everybody and their mother, brother, sister, cousin, uncle and all the smart strategists … try to call, which is a fool's game. You can't do that. Then you've got 12 or 15% upside from there. And listen, I think the number one worry that I would have, quite frankly, is that some of these naysayer strategists, and you know who they are, come on … and say, 'No, I'm bullish.' That would make me worry because they'd be forced to throw in the towel whether or not there's pressure internally or not. But listen, I think this market, as I've been saying since 2009-2010, is going to go down as the biggest bull market in history, a 20-25 year bull market, one that was doubted, whether or not it's climbed the wall of worry or whatever, but it's done a wonderful job of having these rotational corrections and a wonderful job of transitioning from what we believe is happening right now, from a momentum market to more of an earnings-driven market. Our multiple assumptions were down a full point because earnings have been so strong. But I think the biggest thing that people are missing is that the strength of the North American economy and the fundamental structure of North America favors it from an equity perspective and that's why we're still bullish on Canada — seven multiple points lower than the United States and a country that is excessively correlated to the United States. You want a backdoor way to buy value relative to the U.S., you buy Canada right now."
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