The recent decline in the Nasdaq 100 and S&P 500 indexes during September may seem concerning to many investors, but according to Ned Davis Research, it presents a unique buying opportunity. Here’s why:
- Weak seasonality data and excessive pessimism readings are indicating a potential strong rally in the fourth quarter.
- Despite the significant 6% drop in the Nasdaq 100 and 4% decline in the S&P 500, Ned Davis Research believes that this could be an attractive moment for investors to enter the market.
Tim Hayes, a strategist at NDR, highlighted that this current market weakness is setting the stage for a promising three-month stretch. The pessimism and sentiment indicators are signaling excessive negativity, paving the way for a potential sustainable market climb akin to the first quarter surge.
Moreover, internal NDR readings suggest that there are no imminent signs of a sharp bear market decline in the near future. Positive analyst earnings revisions and robust economic indicators further bolster this outlook.
Hayes emphasized the importance of earnings growth as a leading indicator for the market, as analyst revisions and economic performance support a positive earnings outlook. He reassured that the ongoing market correction is likely just a temporary adjustment, rather than a precursor to a new bear market.
In conclusion, Ned Davis Research remains optimistic about the market’s trajectory and views the current downturn as a temporary setback within a larger bull market trend. Investors may view this as a strategic buying opportunity before an anticipated rally in the fourth quarter.
