When Seasonality Breaks: What This Market Is Trying to Tell Us
Is anything predictable anymore?
Aloha Young Investors! 🤙🏽
Patterns are important. But it’s equally important — and perhaps more important — to recognize when a pattern breaks.
By this time of year, the market playbook usually writes itself.
June often drifts. July sometimes rallies. In a post-election year, markets typically recalibrate — the new administration has set its tone, and investors turn their attention to fundamentals. But this summer? The rhythm is off. Confidence is fragile. And the usual patterns aren’t playing out.
Major indexes are near highs, yet momentum has thinned. Breadth is weak. Volume is light. The VIX is low, but confidence feels fragile. For all the talk of AI, rate cuts, and soft landings, it’s as if the market has hit a patch of indecision — not just a pause, but a stutter.
And that may be the most important signal of all.
Not Rotation. Not Retreat. Something Else.
Look beneath the index level and you’ll find movement, but not the kind that fits the standard narrative.
Institutional money isn’t flooding into small caps or cyclicals like the textbooks suggest. Instead, there’s a quiet recalibration: modest flows into industrials and energy, defensive nibbling in healthcare, and a kind of “grudging hold” on mega-cap tech. Even AI names like NVDA and SMCI aren’t so much surging as they are consolidating — with higher lows and fading volume, not exuberant breakouts.
This isn’t a rotation. It’s a reset. And it’s not driven by technicals or seasonality — it’s driven by a macro environment that refuses to sit still.
Volatility by Policy, Not Price
The old market maps assumed a kind of political inertia; that once election season kicked in, policy would stabilize, or at least become predictable. That hasn’t happened.
This administration’s approach to trade policy has been both proactive — with heavy posturing and threats — and reactive, with surprising capitulations or sudden reversals. Tariffs, semiconductors, and energy remain unsettled. Inflation has been sticky but not disastrous. Job figures look strong on the surface, but trends in part-time vs. full-time work raise deeper questions. Meanwhile, the Fed continues to signal in riddles.
The result? A market reacting more to noise than narrative, searching for clarity in a year defined by contradiction.
And so, the usual seasonal patterns are breaking down; not because the market is broken, but because the world it’s pricing in is unpredictable.
Are Retail Investors Leading the Way?
Institutional investors have been sitting on the sidelines, waiting for the dust to settle. But retail investors — people like you and me — took advantage of the dip. The momentum we saw in April and May wasn’t driven by Wall Street, but by Main Street: investors who learned during the pandemic that downturns are temporary, and that dips are opportunities.
Now there’s speculation that institutional money may soon follow. One signal worth watching? A pattern is emerging in the daily charts of the S&P 500, the NASDAQ, and many mega-cap names, and that is the Golden Cross: when the 50-day simple moving average crosses above the 200-day.
But here’s the thing: volume remains flat. That suggests a lack of conviction in the move so far. If institutions do follow retail — whether from conviction or from FOMO — we could see a continuation higher. But if they don’t? This Golden Cross could fade just as quietly as it formed.
Can we trust this move? Will it be the start of a surging bull market — or a fizzled rally flattened by geopolitical and economic noise?
Time will tell.
Mahalo, and Good Luck. 🌺
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