Welcome to the Weekly S&P 500 #ChartStorm, a selection of 10 charts that I handpick from around the web and post to Twitter.
These charts focus on (US stocks); and the various forces and factors that influence outlook, with the aim of providing insight and perspective.
1. Fed Tails: the market recorded a relief rally of 3%
…the next day: the market realizes that no relief will be provided until it is brought under control and a “soft landing” is secured, down -3.6%. Two distribution queues in one week.
2. Stocks versus rising bond yields: Currency tides are dying out and equities will remain high and dry (especially those that have traded at record-high valuations at the perfect price).
3. Links to the massacre: Bonds are murdered.
It’s not good for stocks…
4. Price increase: This chart shows the “A/D line” for central banks (cumulative sum of net amount of rate cuts minus rate hikes). Basically, if it goes up, more central banks cut rates, and if it goes down, more central banks raise rates. Predictably, the market is echoing its moves, and apparently the market seems to be following with a lag, which makes sense (i.e. in terms of policy transmission leads/lags monetary).
My take: don’t think too much about it, you can either swim with the tide or try to swim against the tide…and right now it’s a tsunami of rate hikes.
5. Tightening monetary policy: Similar type of indicator: , but focused on the underlying economic pulse…
Globally, there has been a big pivot towards monetary policy tightening by central banks, which should logically lead to an economic slowdown.
6. Business Earnings Sentiment: It should therefore come as no surprise to see that corporate sentiment has plunged: EPS at risk.
(tighter financial conditions affect stocks directly in terms of liquidity, but also indirectly in terms of economic/earnings pulse)
7. Stocks versus Bonds: Looks like the S&P 500 has melted against bonds.
The chart shows the S&P 500 versus the ultra-long bond since 1980: “Not only is the level high, but it is massively overbought in a relatively short period of time.”
8. History Lesson – Bear Market Rallies: Useful benchmark coin in terms of the seduction and brutality of bear market rallies.
9. Stock market valuations: Smoothed longer-term view of S&P 500 valuations
Maybe we’re ditching that term “permanently top shelf” and instead opting for “Permanently Parabolic?” »
10. Performance of ETF strategies after launch: According to a study, thematic strategies have a habit of underperforming after ETF launch (you could say they are good at picking the best – the easiest time to increase assets under management is when strategy/style/sector is in vogue).
oh… that’s right, I almost forgot!
BONUS CHART >> must include a goody for goodies that have subscribed.
Investor sentiment vs positioning: As noted, investor sentiment plummeted to levels not seen in 2008. But this time, we’re comparing it to investor *positioning*.
Basically, while investors *say* they’re extremely bearish, their portfolio allocations seem to tell about otherwise: investors’ allocations to equities remain close to the top of the range. Hodl came to the stock market?
There were a few times where the sentiment became quite disconnected from the positioning, in some cases it ended up being just hysteria. But in other cases, it ended up being essentially precocious… Or put another way: sentiment reacts immediately, while positioning evolves more slowly.
What it probably takes to move the black line is an actual PMI dip below 50, disappointing earnings, and further proof that the Fed is serious about eliminating the punch and driving it to a landing. slowly.
The other thing is that bonds continue to be bludgeoned. It’s a wallet allowances to stocks vs bonds a bit muddy. So in that regard, what’s probably also needed is a bond bottom (which would likely happen when it’s clear the economy is slowing down and maybe when the Fed moves a bit more forward).
Finally, it must be said that a potential implication of this chart is that there could still be a lot of selling ahead.