After a second straight day where growth stocks and July’s biggest winners up until late last week (in many cases one in the same) sold off sharply, bulls could use the proverbial ‘Turnaround Tuesday’ right about now. When looking at the performance of individual stocks within the Russell 1000 over the last two trading days, it’s hard not to see what looks an awful lot like month-end rotation and rebalancing out of winners.  The table below groups the Russell 1000 components into deciles based on how they performed leading up to last Thursday (7/26).  The stocks in the decile of top performers (decile one) were up an average 13.1% heading into last Friday, while the stocks in the decile of worst performers (decile ten) declined an average of 8.8%.  Looking at how these stocks have performed since last Thursday’s close shows a clear trend where the top stocks have declined the most, while the stocks that were down the most have gotten by mostly unscathed.

The chart below further illustrates the trend as the deciles of top performers MTD through 7/26 are down the most, while the worst performers have held up much better.

Looking at the performance of each decile on a scatter chart, where the horizontal axis represents MTD performance through 7/26 while the y-axis shows performance since the close last Thursday, further illustrates the trend.  As shown, each dot is practically right on the trendline!  Clearly, these charts suggest that there is a good deal of rotation and re-balancing going on in portfolios as we approach month-end.  That doesn’t mean it has to stop when August begins, but it is a trend we have seen to varying degrees towards the end of prior months in 2018.

With July winding down, we’ve been covering market seasonality for the month of August and how market internals stack up heading into the final full month of summer.  To read all about it, you can start a two-week free trial to Bespoke Premium today!

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