Senin, 05 Agustus 2013

S&P 500 Hits 1700 A Month Late

On 1 August 2013, the S&P 500 closed above 1700 for the first time in its history.

That was almost exactly one month later than it should have. Let's revisit one of our now rare public predictions for stock prices, from back on 10 June 2013:

Overall, it was a really boring week, but at least it set up a fun, seeming paradox for our favorite chart. Given the nature of how the moving average of the change in the growth rate for stock prices works, we'll soon see the 20-day moving average for the S&P 500 top out then fall back toward the green line (where it really wants to be), even as the value of the S&P 500 itself rises.

In the relative absence of noise in the market, that would create the potential for the S&P 500 to reach 1700 before the end of June 2013.

But then, noise is always present in the market. It's its volume that's what's random and unpredictable!

A little something we like to call The Bernanke Noise Event intervened in that forecast for the future, throwing the market off track for a whole month, the recovery from which was then drug out a little longer by a poorly considered trial balloon put out by the White House proposing Larry Summers as the leading candidate to be nominated to run the Fed after Ben Bernanke's current term expires in January 2014.

But that new noise began to dissipate when the White House gauged the market's negative reaction and began to float the name of an alternative candidate on Wednesday, 31 July 2013, as the Fed also continued its efforts to repair the damage done by Bernanke back on 19 June 2013. By the next day, enough of the noise of Summers had decreased to allow the S&P 500 to finally close above the 1700 mark.

The chart below shows where we're at today. Mind the comments in our chart above and note the differences from previous versions (hey, if the Fed's Open Market Committee can get by on tweaking the otherwise same statement from meeting to meeting, so should we be able to get away with doing the same thing on our S&P 500 stock prices and dividends per share acceleration chart!)

Change in Growth Rates of Expected Future Trailing Year Dividends per Share with Daily and 20-Day Moving Average of S&P 500 Stock Prices through 2 August 2013, with Dividend Futures through 5 August 2013

Previously on Political Calculations

Unless it becomes relevant as events develop, this is probably the last time that we'll feature the following chain of analysis in considering the major market drivers this summer.

Next, that electronic trail of analysis we've provided throughout the event:

  • The World Investors and the Fed Live In Now - Our snapshot of the market right before the event, in which we note that investor concern about the future of QE was growing and remark that there will be a market reaction in response to the outcome of the Fed's two-day meeting later that week.

  • The Bernanke Noise Event - as the Summer of 2013 shall ever be known to investors....

  • Now Is It Time to Sell? - according to statistics, a quaint branch of mathematics that only works to describe how stock prices vary with respect to their trend when order is present in the market. The problem with it is that the market goes in and out of order, so it's periodically pretty useless....

  • The Fed's Real QE Mistake: Timing - We explain how Bernanke really screwed up.

  • Now What Will You Do? - the statistical line is crossed! We look at everything that we see screaming "sell", without actually saying it's time to sell.

  • The Fed Attempts to Walk It Back - we anticipate how the Fed will respond to Bernanke's error, and we determine if it will work.

  • The GDP Multiplier for QE - Not about investing, at all! Instead, we explain why sustaining QE at current levels is so important to the U.S. economy at present.

  • "Never Bet Against the Fed" - we visually illustrate that the Fed's response to repairing the damage from Chairman Bernanke's blunder is working and recap why fears of stock market doom, despite signals to the contrary, were really overblown.

  • Bernanke Closes the Gap - we mark the end of the Bernanke Noise Event.

  • The Noise of Summers - we note the beginning of a new negative noise event....

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