Too Soon to Call the Bottom? | Episode 162 | 08-09-24

Is it too soon to call the bottom? Megan Horneman, Chief Investment Officer of Verdence Capital Advisors gives follow-up to Monday's sell of and what that means moving forward. "We think it's too early to call this bottom", stating that volatility is not behind us.

Reason being? Economic data was light this week, a recession is still on the table due to the prices paid component spike, treasury auctions were weak, it's the season for pullbacks, and earnings still need to come down. There's still plenty to see and we don't think it's over.

While Markets with Megan won't have new episodes next week, the following week will have more economic data and market insights to share. Subscribe, like, and share with friends and colleagues and for more episodes, go to MarketsWith Megan.fm.

Well, the markets look very different than they did on Monday. This is Friday, august the 9th. It's Markets with Megan and we wanted to come to you today to give you our opinion on what we see going forward. We realize that the markets bounce back pretty nice here after what we saw last Friday and Monday with the big sell-off, but we think it's too early to call this bottom and say that all the volatility is behind us, and there's really a few different factors that we believe that. First of all, this week was extraordinarily light from an economic data standpoint, so the market didn't have anything really to digest there. So that's part of the reason why we think that it was able to rally in this dead cat bounce that we're seeing. The second thing is the recession is still on the table. Nothing's changed there. We haven't gotten any economic data except one piece earlier this week. That was a little bit better than expected. But also keep in mind in that ISM service report the price is paid component. That's an inflation indicator that spiked. So this is definitely something that we think is of risk to the economy and also a risk to the equity markets, because they're pricing in aggressive red Fed rate cuts this year the bond auctions that we had this week. This highlights the fact that Treasury supply is an issue. We had really weak 10 and 30-year Treasury auctions this week. This can threaten markets and spike volatility again.

We're just in the beginning phases of negative seasonality. Typically, it's the worst months are August and September, and actually October is the month in all of the calendar years where we see the most pullbacks of at least 5%, and even those pullbacks of 10% or more happen more frequently in October than any other calendar month. We look at what we call capitulation factors, so this is when the market looks extraordinarily washed out. We haven't seen any of our capitulation factors triggered yet and, lastly, earnings still need to come down. We're not done with earnings season and we think that you're going to see earnings revisions for this year and next year. These are going to come down to reflect a weaker economic dynamic. We haven't seen that yet and that can cause volatility.

So, in a nutshell, we don't think this is over. We'll welcome this nice bounce back we got, but we think there's going to be plenty more opportunities for investors to get into this market Now. I am out on vacation next week, so you'll have a week without markets with Megan, but I'll be back ready to go at it the following week to give you some more economic data as well as you know what's going on with the markets Now. Please don't forget to subscribe like hit that alarm bell here. And if you like these podcasts, please share it with your friends, family or colleagues. And if you're looking for any of our other podcasts, go to marketswithmeganfm. Thank you.