Wednesday, April 1, 2020

U.S. Stock Market Indices – Four Ultra Long-Term Charts

StockCharts.com maintains long-term historical charts of various major stock market indices, interest rates, currencies, commodities, and economic indicators.
As a long-term reference, below are charts depicting various stock market indices for the dates shown.  All charts are depicted on a monthly basis using a LOG scale.
(click on charts to enlarge images)(charts courtesy of StockCharts.com)
The Dow Jones Industrial Average, from 1900 – March 27, 2020:
DJIA long-term chart
The Dow Jones Transportation Average, from 1900 – March 27, 2020:
DJTA long-term chart
The S&P500, from 1925 – March 27, 2020:
S&P500 chart
The Nasdaq Composite, from 1978 – March 27, 2020:
Nasdaq Composite chart
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2514.33 as this post is written

U.S. Dollar Decline – April 1, 2020 Update

U.S. Dollar weakness is a foremost concern of mine.  As such, I have extensively written about it.  I am very concerned that the actions being taken to “improve” our economic situation will dramatically weaken the Dollar.  Should the Dollar substantially decline from here, as I expect, the negative consequences will far outweigh any benefits.  The negative impact of a substantial Dollar decline can’t, in my opinion, be overstated.
The following three charts illustrate various technical analysis aspects of the U.S. Dollar, as depicted by the U.S. Dollar Index.
First, a look at the monthly U.S. Dollar from 1983.  This clearly shows a long-term weakness, with the blue line showing technical support until 2007, and the red line representing a (past) trendline:
(charts courtesy of StockCharts.com; annotations by the author)
(click on charts to enlarge images)
U.S. Dollar Index
Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents a (past) trendline.  The gray dotted line is the 200-day M.A. (moving average):
U.S. Dollar Index
Lastly, a chart of the Dollar on a weekly LOG scale.  There are two clearly marked past channels, with possible technical support depicted by the dashed light blue line:
U.S. Dollar Index
I will continue providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring…
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2504.63 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI2) is one index that is supposed to measure stress in the financial system.  Its reading as of the March 26, 2020 update (reflecting data through March 20, 2020) is 5.7870.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on April 1, 2020 incorporating data from January 8, 1971 through March 27, 2020, on a weekly basis.  The March 27 value is .05:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 1, 2020: 
http://research.stlouisfed.org/fred2/series/NFCI
The ANFCI chart below was last updated on April 1, 2020 incorporating data from January 8, 1971 through March 27, 2020, on a weekly basis.  The March 27 value is .61:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed April 1, 2020: 
http://research.stlouisfed.org/fred2/series/ANFCI
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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2496.58 as this post is written

Tuesday, March 31, 2020

Consumer Confidence Surveys – As Of March 31, 2020

Advisor Perspectives had a post of March 31, 2020 (“Consumer Confidence ‘Declined Sharply in March’“) that displays the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:
(click on charts to enlarge images)
Conference Board Consumer Confidence
University of Michigan Consumer Sentiment Index
There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, the continued subdued absolute levels of these two surveys was disconcerting.
Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)
While I don’t believe that confidence surveys should be overemphasized, I find these readings to be notable, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2624.98 as this post is written

Monday, March 30, 2020

The “CARES” Act (“Coronavirus Aid, Relief, and Economic Security Act”)

On Friday, President Trump signed into law H.R. 748, the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act.
The Act authorizes over $2 Trillion to be spent. As stated in a March 27, 2020 Statement By The President:
The Act makes emergency supplemental appropriations and other changes to law to help the Nation respond to the coronavirus outbreak.
There are a broad array of questions that can – and should be – asked with regard to this stimulus bill. Many of the questions are similar in nature to those that I have discussed with regard to stimulus measures taken during and after the Financial Crisis. Of note, there is broad anticipation that additional large stimulus measures will be taken, especially if the broad-based economic weakness that is occurring – and will continue to occur – persists.
Two excerpts from President Trump’s March 27, 2020 comments regarding the “CARES” Act, as seen in the WhiteHouse.gov release titled “Remarks by President Trump at Signing of H.R.748, The CARES Act“:
THE PRESIDENT:  Well, thank you all very much.  This is a very important day.  I’ll sign the single-biggest economic relief package in American history and, I must say, or any other package, by the way.  It’s twice as large as any relief ever signed.  It’s $2.2 billion, but it actually goes up to 6.2 — potentially — billion dollars — trillion dollars.  So you’re talking about 6.2 trillion-dollar bill.  Nothing like that.  And this will deliver urgently needed relief to our nation’s families, workers, and businesses.  And that’s what this is all about.
also:
This legislation provides for direct payments to individuals and unprecedented support to small businesses.  We’re going to keep our small businesses strong and our big businesses strong.  And that’s keeping our country strong and our jobs strong.
This historic bill includes the following:
  • $300 billion in direct cash payments will be available to every American citizen earning less than $99,000 per year; $3,400 for a typical family of four.  So a family of four: $3,400.
  • And then $350 billion in job retention loans for small businesses, with loan forgiveness available for businesses that continue paying their workers.  The workers get paid.
  • Approximately $250 billion in expanded unemployment benefits.  The average worker who has lost his or her job will receive 100 percent of their salary for up to four full months.
So, things like this have never happened in our country.
  • $500 billion in support for hard-hit industries, with a ban on corporate stock buybacks — we don’t let them buy back the stock; we don’t let that happen — and tough limits on executive compensation.
  • Over $100 billion to support our heroic doctors, nurses, and hospitals.  And you see what’s happening.  And I want to thank, while we’re here, also the incredible job that’s done by the Army Corps of Engineers and by FEMA.  It’s been incredible.  They did four hospitals in two days or three days, in New York.  And they’re, like, incredible structures.  What a job they’ve been doing.  And they’re doing them all over the country.
  • $45 billion for the Disaster Relief Fund, supporting our state, local, and tribal leaders.
  • $27 billion for the development of vaccines, therapies, and other public health response efforts, including $16 billion to build up the Strategic National Stockpile with critical stockpiles.  And I’m going to — we have tremendous supplies coming into the stockpile, and you’ll be seeing that and hearing about it in a little bit because we’re doing a news conference at 5:30 on what’s happening.
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Additional details regarding the allocations of this “CARES” Act can be seen in a variety of media sources, including the Committee for a Responsible Federal Budget (CRFB) March 25, 2020 post titled “What’s in the $2 Trillion Coronavirus Relief Package?
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2584.97 as this post is written 

Thursday, March 26, 2020

Corporate Profits As A Percentage Of GDP

In the last post (“4th Quarter 2019 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.
There are many ways to view this measure, both on an absolute as well as relative basis.
One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.
As one can see from the long-term chart below (updated through the fourth quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.
(click on chart to enlarge image)
Corporate Profits As A Percentage Of GDP
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 26, 2020
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2560.72 as this post is written

4th Quarter 2019 Corporate Profits

Today’s (March 26, 2020) GDP release (Q4 2019, third estimate) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (preliminary estimate) for the 4th Quarter.
Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated March 26, 2020, with a value of $1903.753 Billion SAAR):
Corporate Profits After Tax (without IVA and CCAdj)
Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:
Corporate Profits After Tax Percent Change From Year Ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed March 26, 2020; https://research.stlouisfed.org/fred2/series/CP
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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2557.05 as this post is written

Four Charts Of Recent S&P500 Price Volatility – March 26, 2020

This post is an update to past posts regarding stock market volatility.
While I track many different measures of volatility, I find the following charts to be both simple and clear in depicting the recent volatility in the stock market.
Overall, my analyses indicates that there are many reasons for this volatility, and the volatility is highly significant.
First, a one-year daily depiction of the S&P500 through Wednesday’s (March 25, 2020) close, with a 50-day moving average (MA50) depicted by the blue line:
(click on chart to enlarge image)(charts courtesy of StockCharts.com)
S&P500 1-year daily
Second, a three-month daily depiction of the S&P500 through Wednesday’s (March 25, 2020) close, with a 50-day moving average (MA50) depicted by the blue line:
S&P500 daily 3-month
Third, a three-month depiction of the S&P500 in 60-minute intervals through Wednesday’s (March 25, 2020) close, with a 50-hour moving average (MA50) depicted by the blue line:
S&P500 3-month 60 minute intervals
Fourth, a one-month depiction of the S&P500 in 10-minute intervals through Wednesday’s (March 25, 2020) close, with a 50-period moving average (MA50) depicted by the blue line:
S&P500 1-month 10 minute intervals
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2475.56 as this post is written