There’s just one more full trading day left before we’re through the toughest month of the year for the stock market. August is typically characterized by ultra-low trading volume, making it the most volatile month on average. So, investors have reason to celebrate as we head into the long Labor Day weekend.
However, I still expect September to be very busy. To prepare for what’s to come, here are my market predictions for the next four weeks:
First, I expect that trading volumes will rise significantly in September. This is the time of year when portfolio managers rebalance their portfolios, favoring the fundamentally strongest stocks in the process. The stocks with strong sales and earnings growth will attract institutional buying pressure. So I expect that there to be a big leadership change in the stock market.
Second, I expect that the energy sector will get knocked down a peg. While energy stocks have dominated the market lately, crude oil prices are about their seasonal swoon. Historically, demand for crude oil slows in the fall, and this will put downward pressure on prices. With the exception of natural gas stocks, I think the energy sector is going to crash and burn.
Third, I expect that September will follow a more typical election year pattern. Namely, the stock market typically meanders higher as we get closer to Election Day. That’s because the two candidates are encouraged to promise everything and anything to their voters; this confidence tends to rub off on Main Street and Wall Street. I also have September 26th circled on my calendar, when the two candidates will face off in the first Presidential debate.
So as you can see, there’s a lot to look forward to in the month of September. To prepare, I recommend that you use Portfolio Grader to screen the fundamental strength of your portfolio each week.