by Jason Bodner
September 3, 2025
A polar bear’s skin is black, but its fur is clear. The reason we perceive a polar bear as white is because its transparent hairs scatter and reflect visible light. What looks obvious on the surface is an illusion.
This is a useful reminder for investors: Things aren’t always what they seem.
Look at today’s headlines. Global unrest. Sticky inflation. Tense political standoffs. Geopolitical conflict.
Every news cycle seems to scream “fear.” The perception is that the world economy is teetering, that markets are fragile, that chaos is inevitable. And yet, when you pull back appearances and examine the underlying data, the truth is far less frightening. In fact, most signals suggest resilience, not collapse.
The Seasonal Trap Still Threatens Markets in September
History tells us that August and September are the bumpiest months for stocks. Only 40% of the time since 1990 has September ended in the green for equities. It’s the market’s most treacherous stretch of the year, often filled with volatility, sudden reversals and investor anxiety. This August began in familiar fashion, with a sharp early pullback, stirring fears that the seasonal curse was arriving on schedule.
Yet August didn’t unravel. Equities quickly steadied themselves and moved higher, defying expectations. While investors braced for the worst, the market did what it so often does – surprise us on the upside.
One big reason for that resilience lies in the data. The Big Money Index (BMI), a gauge of unusual institutional money flows, fell out of overbought territory on July 31, perfectly matching what 34-years of history would suggest. Overbought readings rarely last forever, and August often brings distribution.
But then something notable happened: The BMI bottomed at 65.7% and began rising again. Today it stands at 68%, meaning that over the last 25-trading sessions, nearly seven out of ten buy-sell signals were inflows. That’s not frothy euphoria, it’s steady participation in the long-term averages since 1990.
The BMI hasn’t rocketed upward like stock indexes have, but it doesn’t need to. The important point is its direction: the trend remains higher, supported by Elevated Trading Volumes (below, right). Translated, that means, “When strong flows are paired with healthy volume, it shows conviction, not complacency.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
ETF and equity flows confirm the story. Apart from modest outflows in early August, selling pressure has been absent. ETFs have shown virtually no distribution, remarkable for such a nervous time of year.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Instead, we see capital pouring into risk-oriented assets, like:
- Broad Market Funds, Large-Cap and Thematics.
- Materials, Financials and Technology.
- Even Crypto, with Ethereum attracting meaningful inflows, is rising.
Over half of market inflows in August (below) were investment grade bonds, total market and large-cap.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Geographically, North America has led, capturing 64% of August’s ETF inflows, with the vast majority going straight into U.S. equities. Altogether, 68% of ETF inflows in August have targeted stocks.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
But here’s the key number: 87% of U.S. equity inflows since August 1st have gone into companies with market caps below $50-billion. That’s small-cap to mid-cap territory: the higher-risk, higher-reward area of the market that investors typically avoid in stormy seasons. Instead of hiding, money has sought growth.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Sector Leadership: Moving From Safety to Growth
The sector data is risk-on. Since In August, Healthcare, Technology, Financials, Consumer Discretionary and Industrials have absorbed 70% of inflows. These are engines of expansion, not defensive havens.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The rankings tell the same tale. At the start of August, Utilities, a classic “safety-trade,” sat at #1. By August 29, Utilities had fallen to a tie for 4th. Moving higher, Industrials, Technology and Financials, with Discretionary (tied for 4th). Investors are voting with their capital, and they’re voting for growth.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Even the brief pullback in Technology looks like a false alarm. Distribution was mild, quickly reversed, and followed by renewed strength. What could have brought sector-wide weakness resembled a passing cold.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Emerging Tailwinds Support the Bullish Case
Money flows only tell part of the story. The macro backdrop tells most of the rest. Despite the drumbeat of negative headlines, several powerful tailwinds are supporting the market:
- Federal Reserve Policy: Chairman Jerome Powell has signaled that rate cuts are likely. After a long period of restrictive policy, this confirmation provides meaningful relief for risk assets.
- Fiscal Policy: Trump’s “Big Beautiful Bill” includes tax cuts that promise to bolster both consumer wallets and corporate bottom lines. That stimulus could amplify already impressive earnings.
- Valuation: The S&P 500 trades at a forward P/E of 22.1. That’s higher than the 5-year and 10-year averages, but higher valuations are supported by robust growth.
- Earnings: FactSet data shows that with 90% of S&P 500 companies reporting Q2 results, 81% beat EPS estimates and 81% beat revenue estimates. Earnings grew 11.8% year-over-year, the third-straight quarter of double-digit growth. Corporate America isn’t limping – it’s thriving.
That 81% “beat rate” for both sales and earnings is one of the strongest seen in a decade of tracking. It’s difficult to square such strength with the constant narrative of economic “fragility.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Perception vs. Reality
The negative headlines create the paradox facing the current market. The perception, shaped by headlines and emotion, is that danger lurks everywhere. Investors expect fragility. They fear correction and assume the worst. But the reality – visible in the flows, data, and in earnings – is stability, even strength.
That doesn’t mean September will be easy. History warns otherwise. Volatility is always a risk, and headlines aren’t likely to turn rosy. But the underlying foundation looks far more constructive than the average investor might believe, if they only troll the internet and watch financial news shows.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When you peel back the polar bear’s hair – if you dare – you’ll find it changes colors up close. And if you peel back the fur of new reports, the truth emerges: Markets are stronger than the headlines admit. Small-cap and mid-caps are attracting capital. Growth sectors are leading. Earnings are outstanding. Policy is turning supportive. Instead of hiding in defensive trades, investors are leaning into opportunity.’
As my headline says, “Things are not always what they seem,” or, as Winston Churchill put it:
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
Churchill’s distinction is what separates fearful investors (or leaders) from successful ones. In a world obsessed with surface appearances, the real opportunity belongs to those who dare to look deeper.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Growing Impact of AI on Business – and Work
Income Mail by Bryan Perry
It’s Prime Time for Considering Convertible Bonds
Growth Mail by Gary Alexander
August Continued the “Stealth” Bull Market for Precious Metals
Global Mail by Ivan Martchev
The President’s Misguided Assault on the Federal Reserve
Sector Spotlight by Jason Bodner
Things Aren’t Always What They Seem
View Full Archive
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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