You can find me here @ukarlewitz.bsky.social
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1. There’s no PPT
2. The Fed has been hated for 105 years
3. High probabilities do not imply certainty
4. It can always be different this time
5. Things go up over time
6. We’re not all going to agree
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Charts like the one below get confused as being investor sentiment (inflows). They’re not. Specifically, it’s Equity/(Equity+Bonds+Cash). Your equity allocation goes up (and down) with the market and...
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This is auto-correlation. It’s comparing one variable (the value of equities) to itself. Scroll up
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We’ve been debunking this as useful information since at least 2014; $SPX is about 4x higher since then without any meaningful reset in “household allocation.”
Based on historical data, this bodes ill for stock returns over the next 10 years. Not a "sell signal." But definitely a good place to invoke:
Jay's Trading Maxim #18: Follow the trend, but DO NOT fall in love with the trend.
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What to expect in an election year? Based on the averages:
1. Chop/flat through April
2. May swoon
3. June-August summer ramp
4. Flat Sept-Oct
5. Post election ramp into year-end
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July has been the best month of the year the past 9 years :)
But it was below average the prior 9 years :I
And it was the worst month of the year the 9 years prior to that :(
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Strategists expect $SPX to end 2024 at 4850, a gain of 5.5% from here. That’s not especially optimistic. Since 1980, the average annual gain is 10% and it has gained more than 5% 64% of the time
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We are 12 weeks into the year and $SPX has exceeded the year end target for 19 of 20 Wall St strategists
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Since its October low, $SPY has had one drawdown greater than 3% (in April). That's unusual. Even 2013 - a banner year with volatility - experienced multiple 3-5% drawdown every other month or so
$SPX went on to gain 30% in 2013. Along the way, it lost 3-8% six different times. $Vix oscillated between 11 and 20
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While true that more drawdowns are likely and perhaps imminent, attempts at predicting when using stuff like breadth have been failures. One example: $COMPQ would have to fall >5% just to get back to the price when the Hindenburg Omens started a month ago
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Sentiment: $SPY up 3 weeks in a row for the first time since January and equity MF + ETFs have seen nothing but outflows
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$SPX up 6 of 7 wks by nearly 8% since the massive $18b outflow from MF + ETF equities in mid-April. Another $8b outflow last week
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A recession within 2 years has correctly predicted (green lines) whether the incumbent party has stayed in the office in 15 of the last 19 elections (79%)
There hasn't been a recession in more than 4 years, favoring the incumbent
The 4 exceptions (red lines) were all Republicans
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Since 1928, if the $SPX is up August through October, the incumbent wins 87% of the time
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Breadth divergence lower while $SPX hits ATHs, just like 2023. The 10% correction last summer started just as breadth reached +90%
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