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Make that “five” consecutive-monthly advances for the S&P 500. From the April 8th low through the end of September, the index has returned an eyepopping +35%.

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Levered ETFs have been on the scene for almost 20 years, but their popularity has exploded during the post-pandemic bull market led by the tech titans that dominate the Artificial Intelligence evolution.  Two characteristics of levered ETFs suggest to us that this asset class could possibly be a useful barometer of investor sentiment.  First, their exaggerated payouts mean that investors will win big when they are right and lose big when they are wrong, implying a high degree of confidence in their outlook.  Second, with their effectiveness measured in days, these instruments are best used to reflect an outlook that will come to pass in a fairly short time.  These two properties are suggestive of a particular mindset, and our study considers this signaling potential from a number of angles.

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Core gained 3.2% with year-to-date returns now at 10.5%, as equities and bonds both advanced. Select Industries rose 4.9%, led by standout strength in Precious Metals (up 90% YTD) and renewed momentum in Auto Parts & Equipment. Grizzly slipped 1.8%, but continued to benefit from short exposure in richly valued industries.

The Trump administration inherited a fully employed economy, but one showing most leading indicators (except the stock market) flashing yellow or red. Nearly eight months into his term, that’s still the case—only more so.

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The bookends of our sector rankings seem to have stabilized after a very rocky start to the year. The only changes in the past few months have been in the middle of the standings, with Health Care, Industrials, Utilities, and Materials oscillating between the #5 and #8 positions.

Trends in place since the April 9th tariff pause took a little break in August. Within the S&P 500: Value beat Growth, the Top-Ten Index lagged, the Momentum Factor Index underperformed, and High Dividend stocks surpassed all for the first time in four months.

With this year’s gains in each month of the typically weak May-August period, the S&P 500 has taunted those who chose to “Sell In May.” This streak bodes well stocks. Albeit a small sample size for comparison, after successive advances May-August, SPX returned +5.3% over the next four months vs. +1.9% all other years.

In the last 100 years, there’s been only a single Republican presidential term that did not see the economy fall into recession. Since 1925, twelve recessions began under Republican administrations, compared to just four under Democrats.

Small Value stocks (+9%) posted their best return since November 2024. Within our L3000 universe, this style box’s median P/E multiple is still well below its 43-year average.

The S&P 600 had its best month (+7%) relative to the Equal Weighted S&P 500 (+3%) since November 2024. Measured back to April, our Small Cap discount has shrunk from 26% to 19%.

Be it the S&P 500 or MSCI USA Index, U.S. Large Caps are on par with the valuation extremes reached in 1999/2000, and again in late 2021—but they aren’t entirely at the point of qualifying the market as the most expensive of all time. (Give it a few more months, perhaps.)

The Up/Down ratio reads 1.52 and is the highest “two-month” tally since the beginning of 2022. Like our “one-month” figure from July’s reports, this observation is just slightly above the study’s 41-year average. Forward earnings for small- and mid-cap indexes are finally coming alive as well.

Commercial hedgers’ bullish activity the last two months has triggered a series of buy signals on the Russell 2000 and DJIA. Conversely, hedging by the same savvy cohort of futures traders tripped a double-sell on the posterchild for Large Growth: the NASDAQ 100.

To the extent that inflation has been propped up by escalating asset prices, it could also prove to be self-correcting. While rising stocks prices have only been inflationary once in a while, falling stock prices have almost always been disinflationary.