The headline was set and the main theme of this monthly letter was pretty much all written and ready for print. And then China acted, and not with superficial measures like last year. This time China took the economic problems (deflation, below target growth, real estate slump, to name the main ones) it is facing very seriously (see below for more).

More fear than harm in August, as we witnessed one of the most dramatic sell off in stocks in years, with the S&P 500 losing over 7% over 2 trading days. All major indices took a hit due to a combination of factors. It all started with weak job and manufacturing data, and fear that the Fed may have delayed cutting rates for too long and the resulting increased probability of a recession. Meanwhile, the bank of Japan took everyone by surprise by increasing interest rates, leading to the unwinding of yen carry trade (borrow yen at a low interest rate, buy USD, invest the USD in bonds or stocks), thereby taking the volatility index (VIX) to a 4-year high.

The month of July showed what some (including Stork in previous insights letters) warned would happen, but investors were too greedy to heed. The so called magnificent 7 (Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia, Tesla) suffered following earnings releases by Tesla and Alphabet, losing a grand $ 2.6T in market cap in the past 20 days. Meanwhile, the S&P 493 had a decent month. But with the weight of the 7 mega caps in the index, a negative performance was unavoidable. Is this the beginning of a sector rotation? It is hard to say, but in our summary recommendation and graph of the month, we make the case that it could be.

The month of June had more political events than we are used to (or like to have), but not every market reacted the same way. The most talked about is probably the European Parliament elections, which took a heavy turn to the right, dealing a big blow to the parties in power.

The centuries old saying once again proved to be more of a myth than reality. In fact, statistically speaking, the saying should be “Sell in September…”.