S&P500 OTW

2023년 4월 1일

Hello traders, here is some analysis based on what I think is happening. Please note that this might take a couple of days or weeks to come to fruition, but we are already on the way (OTW).

These are the asset classes that are under our S&P500 by percentage:

Information Technology: 27.5%
Health Care: 14.3%
Consumer Discretionary: 12.8%
Communication Services: 10.9%
Financials: 9.4%
Industrials: 8.1%
Consumer Staples: 6.4%
Energy: 2.9%
Utilities: 2.9%
Real Estate: 2.7%
Materials: 2.1%

From the past couple of days, we have seen banking turmoil that had a big impact on some banks like SVB and FRC, among others. I have had many people telling me that the market is coping well as the bailout was announced, but I don't see it well-dwelled in our economy yet. Today, NASDAQ had the best QT scene in 2020, which is a good sign, but we all know that these compressed assets are a lagging indicator for the economy.

Long story short, yield curves are inverted, and average earnings per share (EPS) are negative. This is not enough, as we saw the first-ever deal for natural gas in Chinese currency, which means it could put some pressure on the dollar.

A slower economy could further lead to a slowdown of our financial markets as banks will be tightening lending conditions, as they would need more money to meet the needs of depositors in case of a surge in withdrawals. Also, the fact that we are already 23.48% down from the first rate hike does not bode well. "This time it's different," and we have seen in the past that during the Great Recession (December 2007 - June 2009), the S&P 500 index fell by approximately 56%, while during the COVID-19 pandemic-induced recession (February 2020 - April 2020), the S&P 500 index fell by approximately 34%. The charting could be a little off, but the numbers don't lie.

Given that a recession and an economic slowdown are directly correlated with each other, we can expect to see the S&P 500 taking a hit in the next few days or weeks. During recession times, these asset classes have performed on average as follows:

Information Technology: -43%
Health Care: -20%
Consumer Discretionary: -33%
Communication Services: -36%
Financials: -78%
Industrials: -52%
Consumer Staples: -14%

So, I will be looking at this analysis deeply to figure out more. Some trend lines from 2020 have just been broken in my chart, and I have marked a possible trend pattern. This will be clearer next week as we enter a new QT. I do not trade on days like this, but I sit back and watch price play its role. Feel free to comment below with your ideas and thoughts on this analysis or anything you want to add.

2023년 4월 3일

노트

SSPX total return for March-to-date was 3.67%, but the breakdown was more
» revealing. The 3.67% gain would have been 4.81% ex-Financials' -9.55% decline (it cost the index 1.13%) and it would have been 0.70% ex-Information Technology's 10.93% gain (it added 2.97% to the index, with Microsoft and Apple adding 1.72%, negating the Financial decline). For the Q1 YTD period, the total return was 7.50%, and without Information Technology's 21.82% YTD gain (it added 5.34%, with Apple and Microsoft
adding 2.71%), it would have been 2.71%.