Here’s a very good chart from Reuters showing one of the dominant trends in the market performance of the last 5 years. It shows the 3 month moving average of the S&P 500 minus government bonds versus the Citi G10 Economic Surprise Index. The results show a very tight correlation and a clearly changing trend:
“Valuation may favor stocks, but in recent years economic sentiment appears to have been more significant in determining what investors actually decide to do. The relative performance of stocks and bonds has been closely correlated to the Citigroup G10 indicator of the economic cycle. The recent dip in the latter suggests that on a short-term basis, at least, bonds may emerge as the winners. ”
why the negative correlation in early 2010?
As a trader, one that puts his money where his mouth is, there is not nearly enough historical information in this chart to even talk about it. Except to say that it is slightly interesting… and may warrant further study.
The data points are largely coincident – what is predictive about that?
If they’re coincident then equities should follow the downtrend in the other data, right? I wouldn’t trade off this, but it seems to fit my broader thinking right now about the market being risky….
Is it another way of saying that the market trades on expecations ( what is not yet priced in) and not the reality/ fundamentals? Market might do OK 2-3 months into recession and then suddenly it decide to price in recession and go down 20-40% in one month.
© 2009 pragcap.com · Register for PC
Here’s a very good chart from Reuters showing one of the dominant trends in the market performance of the last 5 years. It shows the 3 month moving average of the S&P 500 minus government bonds versus the Citi G10 Economic Surprise Index. The results show a very tight correlation and a clearly changing trend:
“Valuation may favor stocks, but in recent years economic sentiment appears to have been more significant in determining what investors actually decide to do. The relative performance of stocks and bonds has been closely correlated to the Citigroup G10 indicator of the economic cycle. The recent dip in the latter suggests that on a short-term basis, at least, bonds may emerge as the winners. ”
why the negative correlation in early 2010?
As a trader, one that puts his money where his mouth is, there is not nearly enough historical information in this chart to even talk about it. Except to say that it is slightly interesting… and may warrant further study.
The data points are largely coincident – what is predictive about that?
If they’re coincident then equities should follow the downtrend in the other data, right? I wouldn’t trade off this, but it seems to fit my broader thinking right now about the market being risky….
Is it another way of saying that the market trades on expecations ( what is not yet priced in) and not the reality/ fundamentals? Market might do OK 2-3 months into recession and then suddenly it decide to price in recession and go down 20-40% in one month.
© 2009 pragcap.com · Register for PC
Here’s a very good chart from Reuters showing one of the dominant trends in the market performance of the last 5 years. It shows the 3 month moving average of the S&P 500 minus government bonds versus the Citi G10 Economic Surprise Index. The results show a very tight correlation and a clearly changing trend:
“Valuation may favor stocks, but in recent years economic sentiment appears to have been more significant in determining what investors actually decide to do. The relative performance of stocks and bonds has been closely correlated to the Citigroup G10 indicator of the economic cycle. The recent dip in the latter suggests that on a short-term basis, at least, bonds may emerge as the winners. ”
why the negative correlation in early 2010?
As a trader, one that puts his money where his mouth is, there is not nearly enough historical information in this chart to even talk about it. Except to say that it is slightly interesting… and may warrant further study.
The data points are largely coincident – what is predictive about that?
If they’re coincident then equities should follow the downtrend in the other data, right? I wouldn’t trade off this, but it seems to fit my broader thinking right now about the market being risky….
Is it another way of saying that the market trades on expecations ( what is not yet priced in) and not the reality/ fundamentals? Market might do OK 2-3 months into recession and then suddenly it decide to price in recession and go down 20-40% in one month.
© 2009 pragcap.com · Register for PC
Here’s a very good chart from Reuters showing one of the dominant trends in the market performance of the last 5 years. It shows the 3 month moving average of the S&P 500 minus government bonds versus the Citi G10 Economic Surprise Index. The results show a very tight correlation and a clearly changing trend:
“Valuation may favor stocks, but in recent years economic sentiment appears to have been more significant in determining what investors actually decide to do. The relative performance of stocks and bonds has been closely correlated to the Citigroup G10 indicator of the economic cycle. The recent dip in the latter suggests that on a short-term basis, at least, bonds may emerge as the winners. ”
why the negative correlation in early 2010?
As a trader, one that puts his money where his mouth is, there is not nearly enough historical information in this chart to even talk about it. Except to say that it is slightly interesting… and may warrant further study.
The data points are largely coincident – what is predictive about that?
If they’re coincident then equities should follow the downtrend in the other data, right? I wouldn’t trade off this, but it seems to fit my broader thinking right now about the market being risky….
Is it another way of saying that the market trades on expecations ( what is not yet priced in) and not the reality/ fundamentals? Market might do OK 2-3 months into recession and then suddenly it decide to price in recession and go down 20-40% in one month.
© 2009 pragcap.com · Register for PC
Here’s a very good chart from Reuters showing one of the dominant trends in the market performance of the last 5 years. It shows the 3 month moving average of the S&P 500 minus government bonds versus the Citi G10 Economic Surprise Index. The results show a very tight correlation and a clearly changing trend:
“Valuation may favor stocks, but in recent years economic sentiment appears to have been more significant in determining what investors actually decide to do. The relative performance of stocks and bonds has been closely correlated to the Citigroup G10 indicator of the economic cycle. The recent dip in the latter suggests that on a short-term basis, at least, bonds may emerge as the winners. ”
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