UST Yields vs S&P 500 Dividend Yields As interest rates have risen in the last year, we have seen a number of charts similar to the one below comparing the yield on the 3-Month US Treasury (UST) to the dividend yield of the S&P 500. For the vast majority of the current bull market (up until only a couple months ago) short-term interest rates have been below the dividend yield of the S&P 500. Since the FOMC began hiking rates over two years ago, short-term UST rates have risen. This year, they rose above the S&P 500 dividend yield; a key inflection point creating talk that the higher yield on cash makes UST more attractive than equities. Relative to the current bull market, this may seem impressive. On a longer time horizon, though, this is not the case. Prior to 2009, instances where short-term Treasuries yielded less than the S&P 500 were few and far between. This cross in yields is by no means a red flag for equities, rather, it is a return to what has been historically normal.
so, this week we close out the month (september) and quarter (q3) which has historically been the worst period for the year for the markets. but again this year (like last year) its bucked that trend. barring some disaster this week, either from the fed or a black swan event, its looking like another strong "sell in may & go away" period november historically starts the "best 6 months of the year" with the SCR (santa claus rally) at year end. seems like absent something exogenous or thereof, we should be good to end the year in the green again still don't know about how all the trade wars will ultimately impact things, but thus far the markets have done a pretty good job at brushing a lot of that aside as non-events
Haha yeah definitely looking like it will be another good year for the bulls. Emerging market is down a lot on strong dollar and trade war but our market remains super resilient Anyway, last 3 months could still be interesting with midterm elections and the ongoing trade war
i wonder if we'll actually see a fed "surprise" this week. when i say "surprise" i'm not talking about the 0.25% hike that is all but baked into the cake this week, we know it's coming, but i'm curious if we'll actually get some "meaningful" hawkish commentary for the first time in like forever. i'll have to look back on the charts to see when the last time we saw an actual market reaction to the fed announcement...seems like it's been a really long time. i remember when markets used to whipsaw pretty violently on fed day's, that hasn't been the case in recent meetings...wonder if this will turn out to be yet another non-event... guess we find out on wednesday!
My guess is that with the strong dollar and the rising yields on the long end lately, the FED won’t be that hawkish and we will see yields on the long end coming back down a little, just my guess Anyway will keep an eye on it for sure, if yields rise significantly after the FED, could be a pretty big headwind for equities
New S&P 500 Sector Weightings – What You Need to Know The new GICS sector re-classifications finally took place today, and below are the details. Sector classifications for public companies are determined by the Global Industry Classification Standard (GICS), which is maintained by S&P and MSCI. Below is a table showing S&P 500 sectors with both their new weightings and old weightings in the index. We also include the ETF that investors can use to gain exposure to each sector. As shown, the old Telecommunication Services sector is no more, and the new sector is called the Communication Services sector (ETF=XLC). The 3 Telecom stocks that made up just 1.98% of the S&P 500 as of last Friday are now part of the new Communication Services sector, which has a weighting of 9.93%. The only other sectors that are affected are Technology and Consumer Discretionary. Due to re-classifications, Technology’s weighting drops by 5.1 percentage points down to 20.84, while Consumer Discretionary’s weighting drops 2.68 percentage points down to 10.16%. Below we chart the data in the table above: In terms of size, the new S&P 500 Communication Services sector has a total market cap of $2.69 trillion, which is $2.2 trillion more than the old Telecommunication Services sector’s market cap. The Consumer Discretionary sector now has a market cap of $2.76 trillion, which is down roughly $736 billion from where it stood last Friday. The Technology sector now has a market cap $5.3 trillion, which is down $1.46 trillion. Below are the 23 S&P 500 companies that saw sector re-classifications. The main stocks shifting from Consumer Discretionary into Communication Services are Disney (DIS), Netflix (NFLX), and Comcast (CMCSA). Others making the same shift include Charter (CHTR), Twenty-First Century Fox (FOXA), CBS, Viacom (VIAB), News Corp (NWSA), and TripAdvisor (TRIP). Six companies are shifting from Technology into Communication Services — Alphabet (GOOGL), Facebook (FB), Activision Blizzard (ATVI), Electronic Arts (EA), Twitter (TWTR), and Take-Two Interactive (TTWO). One Tech stock — eBay — is shifting into Consumer Discretionary (joining Amazon.com). Finally, AT&T (T), Verizon (VZ), and CenturyLink (CTL) all shift from the old Telecom sector into Communication Services.
Yesterday marked the end of an impressive streak for the S&P 500 Industrials sector where it had previously closed higher than it opened for 15 consecutive trading days! As shown in the chart below, before the current streak, the prior record for the longest stretch of daily closes above the open was nine trading days. That happened three prior times (April 2004, September 2009, and January 2018). Following those three periods, the sector’s performance was mixed to poor. One month after the day when the streak was broken, the sector was down all three times for an average decline of 2.5%. Not a major decline, but not positive either. Lower Volatility on Lower Correlation As equities have rallied this year, volatility has fallen as seen through the VIX. Currently sitting just under 12, the VIX is nowhere near the extreme single-digit lows from earlier in the year, but it is still far lower than a level of over 16 back in June. A factor behind the lower level of volatility in the market is that stocks have become less correlated with one another. In other words, in general, the performance of one stock is not necessarily indicative of that of another. In the chart below, we show the realized correlation over time. While the current level is nowhere near new lows, it has been a steep drop off to get to where we are. Further declines in correlation will help to lower volatility more as individual stocks move in opposite directions, canceling each other out.
yikes. i'm super late with today's thread but here it is nevertheless- <-- click there to read! hope everyone a great tuesday trading!
New multi year highs for bonds yields ahead of the FED tomorrow Banks stocks actually just up slightly for the day but high dividend sector like utilities is down well over 1%
Square is rolling its payroll services into a mobile app, and payroll stocks are dipping https://www.cnbc.com/2018/09/25/square-payroll-services-mobile-app-sends-adp-payx-stocks-down.html Up almost 10% for the day right now, a new ATH for SQ
FED meeting has been boring lately, but tomorrow we might get an interesting one with yields at multi year highs Could see some volatility in the market if bonds yields surge after the FED
GE went below 8 in March 2009, after the '08 financial crisis. Since it's not in the Dow anymore, I think it could go there again. Think it will be good to look into buying it after the next ER, which will be the first for the new CEO.
running a bit late again this morning, here is today's market movers & news thread- <-- click there to read! have a great trading day ahead to all on this FED day wednesday.
