August Seasonality Is Stranger Than Fiction

August Seasonality Is Stranger Than Fiction

VIEW IN BROWSER

By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

Seasonality really has a funny way of forecasting reality…

You can’t make this up…

This past Monday, July 7, President Donald Trump kicked the tariff deadline from Wednesday, July 9, out to Friday, Aug. 1.

That happened concurrently with a new slew of tariffs affecting some relatively minor trading partners we covered earlier this week.

Now we have Brazil tariffs to contend with too. Only, per usual, there’s a lot more to that than the mainstream financial media narrative is accounting for. But sideline that for a moment and stay on the Aug. 1 tariff deadline.

Now, take a look at our seasonality chart of the S&P 500 covering the past 18 election cycles:

From Aug. 1 through Sept. 4, the S&P 500 has fallen -2.4% on average and more than half the time. That’s after a run-up from now through the start of August that has, on average, taken the S&P 1.84% higher on average more than 72% of the time.

Is the White House watching market seasonality data?

Is this all some vast conspiracy to tank the markets in calculated fashion starting Aug. 1?

OK, obviously not. At least, probably not.

It’s more just another case of data having a funny habit of lining up well with reality. This is just what tends to happen in August and September of post-election years.

We don’t know whether markets will definitively turn down on Aug. 1. We don’t know what will happen with the trade negotiations. Nobody, likely not even Trump himself, knows that right now.

But what we do know is that seasonality data is powerful. You want to keep a bullish bias through the end of this month, and then strongly consider taking a few chips off the table.

Now, about these Brazil tariffs…

Many were dumbfounded by Trump’s fresh threat of 50% tariff rates on Brazil after Wednesday’s market close.

And I sympathize, because the setup seems pretty absurd on its face.

A 50% tariff rate on Brazil would be the single highest import duty of any currently active or threatened tariffs to date. All the major rates proposed against the EU, Canada, and even China are a fraction of that number. (Interestingly, the Southern African country of Lesotho is also threatened by a 50% tariff rate despite a trade deficit of just $234.5 million.)

Not only that, the U.S. currently runs a somewhat rare trade surplus with Brazil of about $5.5 billion. So the U.S. doesn’t stand to benefit as much from these tariffs as it would on a country like China, Canada, or Mexico.

So what’s the reason for them? The prevailing narrative is that it’s political. The current Brazilian government recently filed criminal charges against former President Jair Bolsonaro, alleging the former president tried to stage a coup during the last election. In his letter announcing the 50% tariffs, Trump writes that “it is necessary to have this to rectify the grave injustices of the current regime,” calling those criminal charges a “witch hunt.”

I won’t pretend to know or even care much about Brazilian politics.

But what I will do is look a tad deeper on this than the mainstream media.

What you have to understand about Brazil is that it’s one of the main economic players looking to move away from the dollar. Lula da Silva, Brazil’s president, is very tight with China. Here are some quotes da Silva had after his May trip to China:

“Our relationship with China is very strategic. We want to learn and to attract more investment to Brazil as well. We want more railways, more subways, more technology. We want artificial intelligence. We want everything they can share with us – and the correct word is ‘share,’ because we need to learn to work together so that this relationship can bear the fruits we need,” stated Lula.

The president highlighted the importance of exporting Brazilian commodities to China and revealed his wish to diversify the traded products. “We also want to exchange products with greater added value. We want the Chinese to help us advance the technological development that we need. This is where discussing energy transition, climate transition, and artificial intelligence comes in,” he said.

This comes after years of da Silva publicly advocating for a move away from the dollar and a joint alliance with the BRICS countries to move to a new cross-border payment initiative.

Thinking about this background for more than five seconds gets you to realize that Trump’s punishing 50% tariffs are about far more than just Bolsonaro.

They’re about reining in Brazil and ensuring that its exit from the dollar-based world economy will at the very least not go smoothly, and ideally it’ll be so rough that it won’t happen at all.

The price action in Brazilian stocks certainly does not inspire confidence in a BRICS-led global currency. The iShares MSCI Brazil ETF (EWZ) has gone pretty much nowhere since mid-2022 when all this de-dollarization talk started, and is rightfully down about 6% since last week’s close before the 50% tariffs were announced.

Nonetheless, the Aug. 1 deadline presents significant risk for stocks not just in the U.S., but across the world.

Ride the seasonal wave, especially if it becomes buoyed by trade deal news. But be prepared to make some moves toward the end of July to secure your profits.

Bitcoin set a new intraday record…

Dedicated TradeSmith Daily readers know I’m confident we’ll see bitcoin peak sometime before January of 2026. We outlined the case in our recent piece not just about bitcoin, but the broader trend of “hyper-finance,” better known as tokenization.

Just yesterday as I write, bitcoin has set a new high of around $113,000.

Now, if you think you’re a little late to the bitcoin party… I’ll be honest, you are.

But you’re the kind of late where the snack bowls are empty and your friends are about five drinks ahead of you. In other words, there’s still some fun to be had.

The kind of late you don’t want to be is January 2026, when the neighbor will have just called the cops to shut things down.

The upside momentum for the bitcoin party is still strong for the moment.

The last time bitcoin broke above its all-time high was back in May. The price briefly surged above $110,000 for the first time ever, running about 3.8%.

Since then, the price has consolidated beneath that high with a floor at $110,000. Take a look at this chart:

This latest move above its all-time high has put the price at $112,569. A 4% higher move from there takes the price to above $117,000, where we might expect to see some more resistance.

I will always advocate buying and holding bitcoin on a long-term timeline. But you have to be choosy with when you buy.

Now, frankly, is not the best time to buy bitcoin for the risk/reward ratio. The time to buy was months before the halving, when we started writing you about it and the price was changing hands at a fourth of where it is today.

Of course, if you plan to hold bitcoin for decades, as I do, it doesn’t make much difference buying it now or a year ago.

In the short term, however, there are other opportunities out there, even opportunities in crypto, that are set to deliver greater rewards for the remainder of this cycle.

Stocks related to tokenization are one, which we covered extensively, and I won’t reiterate that here.

But what I do really like right now is the action in altcoins, as shown by the ETH/BTC chart.

I’ve been watching this chart like a hawk for the past few months. Ethereum is the granddaddy of altcoins – everything happening in tokenization right now is being built on it or its close competitors.

As we can see below, ETH has been bleeding out relative to bitcoin for much of the past year. But back in May, it started to flirt with the all-time low for this set back in 2019 as it broke down from a long-term downtrend channel.

Since that bottom, it’s broken back up over the steeper downtrend resistance of the past year, broken back into the channel, and is now attempting to break above stiff resistance at around 0.025:

If we see ETH really continue higher here relative to bitcoin, you can expect the entire altcoin market (worth $1.2 trillion) to start to catch a serious bid as the tokenization narrative takes hold.

Now, we have to also admit this is a pretty high-risk gambit. The simple fact is that bitcoin has been extremely dominant for this entire cycle and is showing little sign of weakness. And compared to previous cycles, this is an anomaly:

The whole idea of buying altcoins is predicated on the thought that the above chart will turn down significantly over the next five months. There’s plenty of reasons to believe that won’t happen.

All this is to say, don’t bet the farm on altcoins… This is a small speculation to take alongside the broader tokenization thesis, which is at this point primarily benefiting choice equities.

And as an idea that’s somewhere between a hedge against the altcoin revival and a long on the broader crypto cycle, look at the bitcoin miners.

The chart below shows the 2025 performance of BTC, bitcoin holding company Strategy (MSTR), and the CoinShares Valkyrie Bitcoin Miners ETF (WGMI) at the top. Below that is the daily revenue generated by the world’s bitcoin miners – easily found using on-chain data and charted here.

Bitcoin miner revenue per day is around its highest level of the year so far, as the higher bitcoin’s prices go, the more each bitcoin miner stands to make from mining blocks.

What’s interesting is that despite not a ton of movement in bitcoin mining revenues over the last few months, not to mention pretty anemic action in bitcoin itself, bitcoin miners have significantly lagged behind. At one point, WGMI was down more than 50% despite little change in revenue.

For me, bitcoin miners are a leveraged bet on bitcoin that actually makes sense. Strategy is a debt-fueled leveraged bitcoin long that doesn’t have much to show for it in 2025. Despite being synthetically exposed to bitcoin’s price moves 2:1 due to its debt structuring, MSTR has just barely outperformed bitcoin so far this year.

The miners, with soaring revenues, are set to play catch-up over the next couple quarters as bitcoin prices continue higher and their profit margins naturally expand. But this is a sector where you want to be choosy rather than buy an ETF.

As you can see, the performance difference between all these mining companies varies widely:

This is crazy timing…

Speaking of coincidences, here’s one that knocked my socks off Thursday morning…

See, on Wednesday, Louis Navellier – aka the “King of Quants” – released his newest research presentation talking all about the next phase of the AI trade.

If you were there, you know that Louis’ big idea is not about some flashy tech stock or a micro-cap pre-earnings AI play. It was about magnets.

Yes, magnets. Magnets are actually the most important element of the next phase of AI.

Why?

Well, you’d know that if you follow TradeSmith Daily.

A couple weeks back we showed you that the first word on China’s trade deal was emphasized to be about rare earth minerals.

Rare earth minerals are what magnets are made of. Magnets are what actuators are made of. And actuators are what robots need for complex movements.

The AI trade is going physical, with major robotics advancements happening in just the last few months. That’s why rare earth metals mining and production companies, especially those based in the U.S., were and still are a smart speculation.

Well, turns out that the company Louis mentioned in his Wednesday night presentation, MP Materials (MP), is up more than 60% the very next day on news it signed a contract with the Pentagon.

The timing is a double-edged sword, of course. Most of the folks watching the presentation Wednesday night did not have a chance to buy the stock before the surge on Thursday.

But it tells us something much more important.

And that’s the simple fact that Louis has extremely effective foresight on the trends that matter.

That was not the only rare earths play Louis shared on Wednesday. Five other picks that went to new subscribers ran higher as well.

So even if you missed this boat, it should also show you how essential Louis’ research is to have in your corner.

Go right here to get the full story from Louis himself.

And be sure to tune in to TradeSmith Daily this Saturday for an exclusive interview with Louis not just about this trend, but the latest trade moves, the One Big Beautiful Bill Act, and a whole lot more.

To building wealth beyond measure,

Michael Salvatore
Editor, TradeSmith Daily

(Disclosure: Michael Salvatore held shares of MARA at time of writing.)