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Aug-25 Outlook

August ETF Outlook — 5 Data‑Driven Picks for the Month Ahead

TrendWell Digest’s model surfaces IJK, IJR, XLK, QQQ, and IJJ as the strongest opportunities for August. Looking back across 23 + years of history (October 2000 → present), when the same combinations of signals aligned or better, this basket delivered an average annualized return of 22 %, versus single‑digit results when the signals were weaker.

July closed with U.S. equities grinding higher despite soft ISM‑Manufacturing prints, another month of disinflation in core CPI, and a Fed that kept rates unchanged while hinting at a possible cut by year‑end. Energy prices cooled on rising inventories, the 2‑to‑10‑year yield curve steepened modestly, and sector volatility remained compressed—macro cross‑currents that echo the quantitative drivers below.

IJK | iShares S&P Mid‑Cap 400 Growth ETF

Tracks: U.S. mid‑cap growth stocks.

  • RSI of Materials (RSIVol‑XLB) at 122 % of norm → an overbought materials sector often precedes a rotation into growth equities. IJK gained 25 % historically when XLB was this stretched, vs. 5 % when calmer.
  • XLE 12‑month price change −6 % (T12MM‑XLE) → cheaper energy lowers input costs for industrial‑leaning mid‑caps; IJK returned 15 % vs. 6 % when energy was rising.
  • 1‑year Treasury spread three‑month change −116 % (T3MM‑DTB1YR) → a sharp drop in short‑term funding costs tends to lift beta sectors; IJK advanced 10 % vs. 5 % otherwise.

IJR | iShares S&P Small‑Cap 600 ETF

Tracks: U.S. small‑cap companies.

  • Six‑month change in small‑cap growth (T6MM‑IJT) −7 % → weakness in high‑beta peers often precedes mean‑reversion into core small‑caps; IJR rose 40 % vs. 5 % when IJT was stronger.
  • Materials RSI 122 % (RSIVol‑XLB) → same overbought reading supports risk rotation; IJR gained 22 % vs. 7 % otherwise.
  • Energy 12‑month change −6 % (T12MM‑XLE) → softer oil historically boosts small‑cap margins; IJR returned 15 % vs. 8 % when energy climbed.

XLK | Technology Select Sector SPDR Fund

Tracks: Large‑cap U.S. technology leaders.

  • 6‑month yield‑curve steepening +172 % (T6MM‑WGS2YR) → a steeper curve signals better growth outlooks that lift long‑duration tech; XLK returned 36 % vs. 8 % when the curve flattened.
  • Consumer‑staples six‑month change +1 % (T6MM‑XLP) → staples lag sets up relative rotation into tech; XLK gained 25 % vs. 1 % when staples outperformed.
  • Small‑cap value volatility at 88 % of norm (StdevT12M‑IJS) → moderate volatility in cyclicals historically channels flows toward megacap tech; XLK posted 19 % vs. 2 % when volatility spiked.

QQQ | Invesco QQQ Trust

Tracks: Nasdaq‑100 mega‑/large‑cap tech.

  • Materials RSI 122 % (RSIVol‑XLB) → same risk‑rotation theme; QQQ posted 31 % vs. 8 % otherwise.
  • Consumer‑staples six‑month change +1 % (T6MM‑XLP) → lagging defensives align with tech strength; QQQ returned 28 % vs. 2 % when staples rallied.
  • August seasonality flag → historically, August has delivered 19 % for QQQ when this calendar signal aligned, vs. 12 % in other months.

IJJ | iShares S&P Mid‑Cap 400 Value ETF

Tracks: U.S. mid‑cap value stocks.

  • Prior‑month change in 5‑year Fed Funds futures −1 % (Delta‑T5YFF) → easing long‑rate expectations raise NPV of cash‑flow‑heavy value names; IJJ returned 17 % vs. 3 % when futures rose.
  • Mid‑cap volatility 87 % of norm (StdevT12M‑MDY) → calm volatility phases often precede breakouts in value; IJJ gained 14 % vs. 6 % when elevated.
  • Fed Funds rate unchanged (Pchange‑DFF 0 %) → policy stability supports cyclical re‑rating; IJJ advanced 13 % vs. 7 % when rates moved.

Compressed sector volatility, a gently steepening curve, and moderating inflation set a constructive stage for these data‑aligned ETFs in August.

We’ll be back next month with more signal‑first insights—and we hope your portfolio continues to TrendWell.

This article is for informational purposes only and does not constitute financial advice.