Author: Kenley Scott

Key Points:

• Looking at seasonality in the U.S., the first half is nearly concluded and has been roughly in line with history.
• But there was huge variance from Q1 (sharp underperformance vs history) to Q2 (large outperformance).
• By sector, the averages did not align quite as well with history. Materials, Capital Equipment, Technology, and Utility sharply outperformed their history. But Cyclical, Staple, Energy, Health Care, and Retail uncharacteristically underperformed.
  • Notably by each quarter, Consumer Cyclical and Technology were among the worst in Q1 and among the best in Q2, which was right in line with history.
• Looking forward, the second half tends to be a bit stronger, especially for the Nasdaq.
• But the performance can be lumpy, and most of the net performance comes from a strong Q4 history.
• Most sectors average between 6–8% for the full second half, with Cyclical, Staple, and Utility, which are only +2-3%.
• Lastly, the monthly breakdown in the upcoming Q3 period should be mentioned, as July is very strong but August and September are much weaker, on average.

Key Points:

• Trade-weighted U.S. dollar down ~11% from January highs, breaking key 100 support, and forming a “bear flag” under the 100 level.
• Risks turning from cyclical to secular bear market—a break below 96–97 (monthly view) may confirm a secular bear.
• Over 40 years, >10% dollar drops over multiple quarters have happened 11 prior times.
  • The U.S. market has a great history, with a median 21% S&P 500 gain over 14 months.
  • Developed and emerging markets (history since 2002) are much better, with 39% and 68% median gains, respectively.

Key Points:

• Updated a note from early-February 2025, which looked at sharp initial drops from highs in AI infrastructure stocks, and related to prior cases of quick/sharp drops from highs.
• The initial guess was that the drop would at a minimum cause a 3–4 month base in the stocks, in the successful cases. The longer lows take to establish, the less chance of successful cases.
  • Prior periods 2023–2024 and 2021–2022 were very different in outcomes despite similar initial drops. Stocks bottomed more quickly and many more made it back to highs in 2023–2024.
• For the 2025 period, it bears some similarities to each:
  • While the drop to ultimate lows was more like 2021–2022, the time it took was more like 2023–2024.
  • By this point in 2023–2024, many in the group were back at highs. The current group is still well off highs in general, although building right sides of bases in most cases.
  • On individual names, GEV looks like the first to have fully completed a base. CIEN looks more like the median stock in the group, still 21% off highs but on the upper–middle to right side of a base. MRVL is among the worst, with little recovery from lows, and mirrors many 2021–2022 cases.