Those that follow my personal account on Twitter will be familiar with my weekly S&P 500 #ChartStorm in which I pick out 10 charts on the S&P 500 to tweet. Typically I'll pick a couple of themes and hammer them home with the charts, but sometimes it's just a selection of charts that will add to your perspective and help inform your own view - whether its bearish, bullish, or something else!
The purpose of this note is to add some extra context beyond the 140 characters of Twitter. It's worth noting that the aim of the #ChartStorm isn't necessarily to arrive at a certain view but to highlight charts and themes worth paying attention to.
So here's the another S&P 500 #ChartStorm write-up!
1. S&P500 Total Return Chart: First up is a quick look at the S&P500 in total return terms (i.e. incorporating dividends), the notable point here is that on the 25th of July in total return terms the S&P500 actually made a fresh new high for the year. More an interesting observation than earth shattering insight.
Bottom line: Accounting for dividends, the S&P500 in total return terms has already made a new high this year.
2. S&P500 vs Chinese Stocks: Seems like some people are talking about this chart as a harbinger for US stocks (that it is a gap that needs to close). I would say it's a logical reflection of the underlying macro currents. China's economy is cooling due to peaking property price growth, a rolling over of export growth, and the delayed flow through of previous policy tightening. Compare this to America where earnings are accelerating, and economic growth numbers are running hot. What I would note though is that the PBOC is in easing mode, vs the Fed in tightening mode, and Chinese stocks are cheap vs expensive US stocks. So it's a divergence in price which reflects an underlying macro divergence. Will the gap close? We'll see.
Bottom line: Chinese stocks are diverging vs US stocks due to divergent macro currents.
3. S&P500 Priced in Gold: I thought this chart was really interesting because of the apparent long term cycles. It shows the S&P500 priced in gold (so if it's going up it basically means equities are outperforming gold. What I find most interesting is how extreme and extended some of the historical moves have been, so the key conclusion in my view is that there's no telling how far the current move will go.
Bottom line: The S&P500 is outperforming vs gold, and this may continue.
4. US Buyback Seasonality: There has been a lot of talk about corporate buybacks, some people lament it as a distorting force, others just write it off as a background feature. Whichever camp you fall in, you can't deny the flow-power of buybacks, and interestingly enough the average tendency is for buyback activity to spike in August, with an average 13% of total buybacks for the year taking place this month. All else equal this should be a bullish tailwind.
Bottom line: Buybacks tend to be slightly more concentrated in the month of August.
5. US Earnings Surprise Indicator: As earnings season heats up, it's worth noting how strongly positive earnings surprises have been. This chart from Nordea Markets shows the extent of earnings surprises - the strongest since 2009. All else equal this is a bullish tailwind from a fundamental perspective.