Welcome to the weekly S&P500 #ChartStorm. The Chart Storm is a weekly selection of 10 charts that I handpick from the internet (+ some of my own charts) and then post.
The charts focus on the (US stocks); and the various forces and factors that affect outlook—with the aim of creating insight and perspective.
This week: monthly charts, seasonal stats, cyclicals vs defensives, corporate bonds, home builders, price targets, valuations, IPO market trends…
1. Happy New Month! Back above the 10-month moving average (ie ~200 trading days) in late March… They say nothing good happens below the 200-day moving average. crisis averted? However, as a side note, it is interesting to note that the real/CPI-adjusted S&P 500 is still below its 10-month moving average.
Source: @topdowncharts
2. Season Stats: April is historically the best month for the S&P 500 in terms of average return and proportion of positive times.
(although it was negative 26% of the time and the worst April was -9%…ie note the StdDev)
Source: @topdowncharts
March 3 Return in Focus: US Large Cap March Performance in Context… Up 3.6% MoM but still down -4.9% YTD. This year, the main winners were cash and commodities, while fixed income was the biggest loser.
Source: Asset class returns
4. Cyclists vs. Defensive: The relative performance line between EM cyclicals and defensive stocks peaked 9 months before that for the US. And breached in October… bullish or bearish?
Source: @topdowncharts
5. Corporate Bond Market: The breadth of corporate credit doesn’t validate the strength of the S&P 500 right now. To be fair, much of the weakness is in duration versus credit, but we generally can’t ignore the impact of higher bond yields…
SPX vs. Corporate Bond Market
Source: @McClellanOsc
6. Builders vs. Mortgage Rates: Higher yields are dangerous…
Don’t underestimate the impact of higher bond yields. From my numbers, the indicative indicator of mortgage servicing costs is up 94% since bottoming out (and that could cause problems for the broader growth outlook).
Source: @MrBlonde_macro
7. Price Targets: Analysts believe they have the greatest advantage.
Source: FactSet
8. European stocks: Thanks to the heightened risk of WW3, European stocks are now trading at a record valuation discount to the US. Some will remark that this hasn’t mattered in recent years, that you could have made similar comments about valuation discounts, but we are at an extreme here and extreme valuation claims carry far greater weight.
Source: @Ozard_OfWiz
9. Price-to-Book Reviews: The price-to-book ratio of the S&P 500 is still at breathtaking levels.
The correction has scarcely left a dent: the top quartile of industries are trading at *higher* price-to-book multiples than during the dot-com bubble, despite a (minor) rebalancing. The lower quartile is also at the upper end of the range, and last but not least: the median is well above what has ever happened in recent history.
Source: Chart of the Week – Skyrocketing ratings
10. SaaS Reviews: Software valuations, on the other hand, have corrected quite a bit (at least compared to the recent past – and of course we have to assume that those “next 12 month sales projections” are correct…)
Source: RedPoint Ventures via @SnippetFinance
oh… right, almost forgot!
BONUS CHART >> I need to add a goody for the goodies who subscribed.
IPO Market Update: As you can imagine, and as is usual in a period of rising and falling valuations, the number of IPOs completed in March hit a record high.
Of course, this should be seen in the context of previously booming/bubbling IPO filing activity, which hit a record high early last year.
I’ve highlighted this chart and others like it, and perhaps the biggest takeaway is that the surge in IPO withdrawals is a sort of barometer of overall investor sentiment and the liquidity backdrop.
Late 2020/early 2021 may have been the peak of the liquidity boost and investor euphoria. But now the liquidity gluts are receding (e.g. Fed rate hike beginning + QT soon), and sentiment is starting to change…
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