Our August 2023 stock and ETF watchlist with entry points, sector analysis, and market outlook.
Market Overview
Welcome back to The Wealth Catchers' watchlist. The month of July showed us that this rally was only getting stronger. I know in the last two watchlists June and July I mentioned how this rally was very concentrated and the "Magnificent Seven" are what were keeping the market up. It's safe to say that we now have more market participation from other sectors. The equal-weighted S&P 500 (RSP)is now up 7.24% YTD compared to being down 1.30% back in June. Also mentioned in the July Watchlist it was noted that the Dow Jones (3.84% 07/2023) and the Russell 2000 (7.88% 07/2023) were lagging and could have offered some opportunities to gain a decent return. At the time of this posting the Dow Jones and Russell 2000 are up 5.82% YTD and 11.81% YTD respectively. Now all this information is very encouraging in my opinion. As for my thoughts on if this is a bull market? As of now we are about 7% away from breaking the S&P 500 all-time high that was set back in January 2022. We are in striking distance. This provides with enough certainty that this is a bull market. This year started off tremendously strong, so strong that it's safe to say we will end in the green in my opinion. Now will we get the same gains as we did in the first half? I highly doubt it. But it can be expected the bulls will keep pushing upward. Since 1950, the S&P 500 has followed up a positive first half with an average second half gain of 6.0%. Furthermore, when first half gains were 10% or higher, the index posted average gains of 7.7% in the second half, with 82% of occurrences producing positive results.[1]
Crypto & Digital Assets
Now on to other news, Jerome Powell and the Fed struck again. The Fed chose to raise interest rates again by 25 basis points. This didn't have much impact on the market as Powell has done a great job of reminding us that rates will continue to rise until there is a significant decline in inflation. Remember, the Fed's target inflation rate is 2%, we are currently at around 3%. I know these rate hikes are putting a hurt on consumers that are looking to get mortgages and car loans but we also have to look at how far we came. Inflation was at a 40-year high back in June 2022, we were at 9.1%! The Fed has been extremely aggressive at combatting inflation and the data shows that it's working. Also they are doing it successfully without tipping us into a recession, so it seems. Remember they changed the definition of what a recession is a few months ago. All in all, the talks of a "soft landing" seem to be more of a reality. According the the FedWatch tool there is speculation that the Fed will be skipping the next rate hike for September. This will leave us with a probability of about 25%-27% that the Fed will raise rates in November or December. Keep in mind, part of the market believes that the Fed will be cutting rates soon. Now Powell has said so himself that "Not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate if you think about it."[2] Granted, this statement was two months ago, but the FedWatch tool shows us that the market is predicting rate cuts in late spring/early summer of 2024. That spells more gains on the horizon for the market when those cuts begin to take effect.
Monthly Performance
Also, some of our favorite names in the market and on the watchlist have hit all-time highs in the month of July. They're listed below:Microsoft; All-time high: $366.78Apple; All-time high: $198.24Nvidia; All-time high: $480.88McDonald's; All-time high: $299.35At the close of month here are how the indices performed:Dow Jones (3.32%)S&P 500 (2.99%)NASDAQ (3.83%)Russell 2000 (5.61%)At the close of the month of July the VIX was at 13.76. At the close of the month the "Fear and Greed" index was at 78 indicating extreme greed in the market.
Index Performance
| Index | Performance |
|---|---|
| Dow Jones (Jul 2023) | +3.32% |
| S&P 500 (Jul 2023) | +2.99% |
| NASDAQ (Jul 2023) | +3.83% |
| Russell 2000 (Jul 2023) | +5.61% |
| VIX | 13.76 |
Top Sectors
Bottom Sectors
Stock Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| AAPL | $161–$171 | $136–$159 |
| MSFT | $280–$293 | $248–$281 |
| NVDA | $265–$351 | $236–$271 |
| GOOGL | $105–$116 | $94–$103 |
| TSLA | $195–$216 | $157–$194 |
| AMZN | $106–$114 | $102–$109 |
| META | $232–$293 | $155–$240 |
| MCD | $273–$279 | $262 |
| COST | $481–$503 | $450–$508 |
| V | $223–$231 | $194–$210 |
| WMT | $145–$152 | $131–$138 |
| JPM | $133–$140 | $127–$132 |
| SHOP | $40–$45 | $31–$46 |
| CRWD | $119–$132 | $101–$130 |
ETF Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| VOO | $376–$390 | $355–$386 |
| VGT | $374–$409 | $311–$383 |
| VUG | $210–$264 | $208–$244 |
| SMH | $121–$139 | $98–$126 |
Key Takeaways
- →July 2023: Broad market participation improved — Energy, Communication, and Financials led.
- →ATHs: MSFT $366.78, AAPL $198.24, NVDA $480.88, MCD $299.35.
- →Russell 2000 +5.61% — small-caps beginning to participate more meaningfully.
- →VIX at 13.76; Fear & Greed at 78 (Extreme Greed) — elevated but not historically dangerous.
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