Setting the Scene…
We sat down to assemble the charts and data for the July HVP Risk Dashboard a few times in the past week. Each time we did, it seemed that any data point we collected and chart we ran was out of date by the time we hit save. The period between the June release and now highlights that while some investors may check out for the summer, markets do not.
In his early June interview at the NYSE, HVP’s Christopher Davis shared our expectation that there was potential for a rotation “under the hood” of the market and that some of the sectors and factors that had lagged YTD might wake up and present opportunities. A few weeks later in an Investment News video, Davis was pressed when the market might turn for value stocks. He replied that “it’s always darkest before the dawn” and that the turn could be at any point. Further commenting, that for those that stuck with the fundamentals, there would be a chance to see that leadership shift before the market cap weighted indexes reflected it. Little did we know the wait would only be a few weeks. The market’s breadth was at one of its narrowest levels on record - with strength coming from just a few rather expensive stocks at the market’s recent local highs.
But the air changed in July. Whether it is the start of a larger trend remains to be seen, however the outperformance of small cap and cheaper stocks so far this month has been breathtaking - some days even moving 2-3% higher relative to tech heavy and expensive indexes like the NASDAQ for some of the biggest relative moves in the history of markets (WSJ).
As you’ll see in this month’s notable charts section, geopolitical risk is back, and volatility has woken from its long slumber. The earnings season now underway is the first since 2Q 2022 with meaningful expectations for high single digit earnings growth in the broad market. We will find out soon enough whether the market can deliver.
As a companion to this month’s risk dashboard, in a recent podcast, we shared a bit about how the dashboard factors into the top down and bottoms up components of our investment process. You can have a listen here.
Notable Charts of the Month
The team at HVP comes across dozens of notable charts besides those that we like to come back to week to week and month to month. Here we share a selection of those that caught our eyes and should appeal to professional and individual investors alike. This month the fireworks were in some of the charts and tables we look at each month, so we’ve moved them here to be front and center.
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