Posts tagged: S&P 500

Something important about S&P 500 Index (as of Feb. 28, 2017)

S&P Index at inflection points

Source: J.P.Morgan Asset Management, as of Feb. 28, 2017

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Is only a small minority of stocks actually driving market gains?

“Quick, before you read this post, ask yourself these questions:

1. What percentage of stocks beat their benchmark index over their lifetime?

2. What percentage of stocks have a negative return over their lifetime?

3. What percentage of stocks lose essentially all of their value?

Not sure? The answers to all three questions are below.


When most people think of the stock market they do so in terms of index results. Popular indexes include the S&P 500 and the Russell 3000. However, most people are not aware of the tremendous differences between winning and losing stocks “beneath the hood” of a diversified index. From 1983 to 2006 over 8,000 stocks (due to turnover and delisting) were at some point members of the Russell 3000. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.


Key findings:

  • 39% of stocks had a negative lifetime total return (2 out of every 5 stocks are money losing investments)
  • 18.5% of stocks lost at least 75% of their value (Nearly 1 out of every 5 stocks is a really bad investment)
  • 64% of stocks underperformed the Russell 3000 during their lifetime (Most stocks can’t keep up with a diversified index)
  • A small minority of stocks significantly outperformed their peers (Capitalism yields a minority of big winners that all have something in common) Read more »

Predictions for the stock market in 2016…

“Uncertainty about how markets respond to the first interest rate hike in nine years, commodity price weakness, and slow global growth are some of the things strategists have identified as potential headwinds for stocks and earnings. We’ve rounded up the calls from the top firms on Wall Street that we have so far.

We also included their original 2015 targets, so you can see where the strategists stood a year ago compared to where the market is now. Many of these were revised as the year unfolded.


Goldman Sachs

Goldman Sachs

2016 year-end target: 2,100

2016 EPS forecast: $120

2015 year-end target: 2,100

Comment: “We forecast the S&P 500 index will tread water for a second consecutive year in 2016,” wrote David Kostin. “Our year-end 2016 target of 2100 represents a 1% price gain from the current index level (2089), which itself is just 1% above the year-end 2014 level of 2059.”

Source: Goldman Sachs

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10-Year Treasury Yield and S&P 500: where negative correlation starts?

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10Y UST and S&P500: long term trends

“Over the same 30-year period that global stocks have delivered their stellar +7.5% real return, a constant maturity portfolio of 30-year U.S. Treasuries has delivered a no less impressive +6.2% real,” GMO’s Ben Inker writes.

4.24.4 Read more »


A Fascinating Way To See Bubbles Within The Stock Market

Asset bubbles are notoriously difficult to identify as they are happening.  Often times, they only become clear in hindsight. Having said that, Goldman Sachs’ David Kostin offers an interesting stock  market chart in his team’s new US Quarterly Chartbook. It shows the sector composition of the S&P 500 by market cap since 1974.

As you can see, sector bubbles manifest when they suddenly explode as a  percentage of the S&P 500. The dotcom bubble is very prominent, represented by the ballooning info tech  sector stocks. The credit bubble appeared much more gradually as seen in the  rise of financial sector stocks. “Financials was only the third sector since 1975 to represent 20% of the  market capitalization of the S&P 500,” noted Kostin. “However, Financials  share of the S&P 500 market cap has declined from 22% to as low as 9% in  early March 2009.”

cotd bubbles

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Wall Street’s Targets For The S&P 500 And The 10-Year Yield for 2014

Screen shot 2014 02 25 at 7.50.37 AM

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Here’s A Look At Each Year’s Big Stock Market Sell-Off Since 1980

So far, 2014 has been a volatile year for the stock market. The S&P 500 has gone from its all-time high of 1,850 on January 15 to a low of 1,737 on  Wednesday. This is a brutal 6.1% intra-year decline. For the year, the S&P 500 is no  down 5.2%. However, these big intra-year drops are very typical of the markets.

Check out this chart from JP Morgan Funds’ David Kelly. According to Kelly’s  research, the average annual intra-year drop since 1980 is a whopping  14.4%. This makes this year’s sell-off look minuscule. More importantly, annual returns during these years have been positive 26 out  of 34 times. Yes, the recent volatility hurts. But it’s no reason to freak out.


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Копилка мнений: чего инвесторам ждать от фондового рынка США в 2014 г?

Феноменальный рост фондового рынка США в этом году делает крайне актуальным вопрос о том, чего же ждать инвесторам в 2014 г. Продолжит ли рынок расти, подогреваемый устойчивым восстановлением экономики и низкими процентными ставками, или возьмет передышку после того, как Федеральная резервная система начнет сворачивать программу денежного стимулирования? Индекс Dow Jones вырос с начала года на 22%, S&P 500 — на 27%. По всем меркам, этот год можно назвать историческим, он стал лучшим со времен бума в конце 1990-х (даже во время посткризисного восстановления в 2009 г. DJ вырос на 18,82%, а S&P — на 23,45%). Но исторические данные свидетельствуют, что от следующего года вряд ли стоит ожидать подобных успехов. По подсчетам Birinyi Associates, с 1927 г. S&P 500 показывал годовой рост на 20% и более 23 раза. Средние темпы роста на следующий год составили 6,4%, что лишь немного превышает среднегодовые темпы за весь период с 1927 г., составившие 5,5%.

Лишь один раз после 20%-ного роста рынок показал еще более высокий результат на следующий год: если в 1996 г. S&P 500 поднялся на 20%, то в 1997 г. — на 31%. Правда, высокие темпы сохранялись еще два года, когда надувался пузырь на рынке акций компаний «новой экономики»: в 1998 г. индекс вырос на 27%, а в 1999 г. — на 20%. Шесть раз с 1927 г. 20%-ный рост повторялся на следующий год, а восемь раз рынок падал после того, как вырос на 20% или более. Read more »


Here’s What Has Been Driving The Stock Market Since 1960

The S&P 500 is already up 26% since the beginning of 2013, and almost all  of those returns have been driven by an expansion in the multiple investors use  to value the market as opposed to actual growth in companies’ earnings. “Year to date, 75% of the S&P return  has come from its [price-to-earnings ratio] expanding to 16.5x from 13.7x trailing EPS at 2012 end,” writes  Deutsche Bank chief U.S. equity strategist David Bianco in a note to clients.  “Excluding 2009, this is the largest [valuation multiple] contribution to market return since 1998. Before  assuming further [multiple] expansion we think it is important that investors be  confident in healthy EPS growth next year. Hence, we encourage frequent re-examination of the capex and loan outlook upon new data points.”

The chart below decomposes S&P 500  total returns for each year since 1960 into the contributions from multiple  expansion, earnings growth, and dividend yield. “In our view, further S&P [multiple] expansion from 15x 2014E EPS  today would be justified if long-term Treasury yields slowly rise as the Fed tapers, but plateau below historical norms (~4% 10yr, ~2% 10yr TIPS or less),”  says Bianco. “The less the Fed’s balance sheet expands in 2014 the less the risk  that yields rise above historical norms when QE ends or when the Fed’s balance  sheet contracts.”



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