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We’ve mentioned that concerns over potential seasonal weakness in September and October seem pronounced this year, perhaps because the year has so far turned out a pleasant surprise following its horrendous start.

Our EM Allocation Model triggered a BUY at the end of August after 5 1/2-years in bear mode. This upgrade is consistent with a cyclical leadership run of one to four years relative to Developed Markets.

The MTI’s subset of Momentum measures entered September at a 6 1/2-year high reading of +1028, with only two of the category’s 40 inputs in bearish territory.

Call off the mortician, and bring on the pediatrician for the bull market’s 7 1/2-year checkup this month.

While the most inflated domestic-valuation readings are found in the Large Cap realm, the market rebound has driven the median 12-month trailing P/E in our Small Cap universe to 22.5x (Chart 1)—less than a point away from the June 2015 all-time high of 23.3x.

Market anxieties have inched up over the last several weeks despite the proximity of all major indexes to cycle highs. The MTI’s Attitudinal category has improved by about 70 points in the past few weeks, and we sense more worry than usual over potential for turmoil in the seasonally-weak months of September and October.

An encouraging break from a 15-month leadership pattern: Low Vol stocks have rolled over since mid-July, while the High Beta cohort has finally eclipsed its late-April highs.

Last month we described ourselves as “long on equities, but light on conviction,” and that description still applies.

The impact of atypically-high current valuations has become a challenge for style-box investing. High quality, mature dividend payers have habitually resided in the Value and Blend boxes, but investors have bid up those valuations as they look for alternatives to low bond yields.

We examine the factor category strength behind Apparel Retail, Life Sciences Tools & Services, and Technology Hardware Storage & Peripherals.

Attractive-rated groups include Building Products, Homebuilding, and Household Durables—these three groups possess similar industry drivers and thus exhibit highly-correlated stock returns.

We made it through the entire month of August without a 1% daily move (in either direction) for the S&P 500. We have to go back to July 8th, 42 trading days, to find the last 1% move. This is the sixth longest streak without a 1% move since 1979.

Value stocks edged out Growth in each market cap segment. Small and Mid Cap Value remain the best performing segments YTD, up 14.6% and 13.2%, respectively.

Our Ratio of Ratios made a fresh 13-year low in August. Small Caps are now selling at a 6% valuation discount using non-normalized trailing operating earnings.

Adding in the second month of Q2 2016 earnings, our Up/Down Ratio now sports a reading of 1.23. If we isolate the month of August, it was the best second-month result of the past six quarters.

There is still room for spreads to compress. We maintain our Favorable view of US Investment Grade Corporates.

Given the not-too-hot-not-too-cold macro backdrop, we expect the credit rally to continue in the near term and favor spread products within fixed income.

Whether rates hike in September or December, we know the Fed will be very supportive of the market and the biggest beneficiaries will likely be EM and higher-yielding assets.

After performing well since the 2009 meltdown, Momentum is having its first noticeably poor year. The magnitude of the underperformance is in line with other past years of poor performance. Materials and Energy have been the main drivers.

The Major Trend Index remained firmly in positive territory for the week ended August 26th, dropping 0.02 points to a reading of 1.22. Net equity exposure in both the Leuthold Core and Global Funds remains unchanged at its recent level of 61%.