All of this said, there are reasons to be on the alert for a retracement of recent gains in August. The SPX consistently reacts negatively as it approaches each "round number" milestone (like 2200) for the first time. NDX has returned to its late 2015 resistance level. Some measures of shorter sentiment are heady. And August is seasonally weak and prone to a larger interim drawdown. Importantly, none of this is likely to be trend-ending.
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In our last market summary at the end of June, the near term set-up was for higher equity prices in July (that post is here). For the month, SPX gained 3.5%. The leader has been NDX, which gained more than 7%. Outside the US, Europe gained 3.6% while emerging markets continued to outperform the rest of the world, gaining more than 5%.
Recall that the Brexit vote knocked 6% off US equity prices to close out the month of June. As we wrote then, non-economic shocks (like Brexit) tend to leave minimal damage to stock indices. In a study of 14 non-economic shocks since WWII, S&P Capital found that US indices bottomed within 6 days and had regained all of the losses within 2 weeks (read more here).