Daily Brief - The one chart to keep in mind

TLDR: Valuations have been higher only during the dot.com and 2021. This has strong implications for traders and investors alike.

You can find the chart above at this link. The chart shows the forward P/E ratio for S&P 500, and it should provide a somber background for any investment decision you make going forward.

And if that’s not enough, you can couple expensive valuations with very bad Economic Surprise readings. And with contraction-level New Order PMIs from ISM.

Really, this is not looking good…except, US earnings are still going strong. Nevertheless, this looks like a fragile market with weak underpinnings. Be careful.

How to trade it For allocators, those long treasuries are looking spicier by the day..

For traders, imagine the number of market participants coming back to the market in September and looking at S&P 500 futures close to 5,700. Someone’s bound to take profit.

Market Movers: Sectors to look out and watch for

Here are the historically best and worst performing US sectors on a 1-month horizon, when the S&P 500's forward P/E is above 22:

Top 3 Performing Sectors:

1. Information Technology: +1.12%
2. Industrials: +0.88%
3. Energy: +0.85%

Bottom 3 Performing Sectors:

1. Consumer Staples: -0.15%
2. Consumer Discretionary: 0.00%
3. Communication Services: +0.16%

Earnings Spotlight: Price cuts payoff for Target

Target's stock surged after the company exceeded expectations in its second-quarter earnings, prompting an upward revision of its full-year earnings per share forecast.

The retailer reported $25.42 billion in revenue, marking a 2.6% increase year-over-year, surpassing analysts' predictions. Effective cost-cutting measures contributed to a significant 40% rise in net income, reaching $1.19 billion. After a decline in the first quarter, comparable store sales rebounded with a 2% increase, fueled by a 3% uptick in in-store traffic and an 8.7% rise in digital sales, driven by the growth of same-day services.

Additionally, discretionary sales, particularly in apparel and beauty, showed meaningful improvement as consumers began to spend more on non-essential items despite ongoing inflation concerns.