August is living up to its reputation as a lousy market month, but no one's panicking

As we enter its final two weeks, August is living up to its reputation as a lousy month. Three straight down weeks. With a decline of 4.8%, this is the worst month so far for the S & P 500 since December 2022. With the exception of energy and health care, which are basically flat for the month, the pain is fairly evenly distributed: S & P sectors in August Technology down 7.8% Banks down 7.2% Utilities down 5.8% Materials down 5.8% Consumer Discretionary down 5.8% Real estate down 5.

Using this calculation, the current earnings yield of 5.3% for the S & P 500 minus 4.2% for the 10-year Treasury gives an ERP of 0.9%. Is that good or bad? It's bad. Since the Great Financial Crisis, the ERP has typically been between 2% and 4%. Below 1% and we are near the worst levels since 2007. Simply put, it means there is very little reward for the extra risk investors are taking for owning stocks. Back to the good news The good news is, volumes remain seasonally light.

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