Author Archive for Chart of the day

Chart of the Day – Market Performance in Mid-Term Election Years

By Chart of the Day

Today’s chart illustrates how the stock market has performed during the average mid-term election year. Since 1950, the first nine months of the average mid-term election year have tended to be subpar (see thick blue line). That subpar performance was then followed by a significant year-end rally. One theory to support this behavior is that investors abhor uncertainty. To that end, investors tend to pull back prior to an election when the outcome is unknown. Beginning in early October, however, the outcome of the election becomes increasingly apparent and investors respond by positioning their portfolios accordingly.

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Notes:
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Chart of the day: Earnings in Perspective

Via Chart of the Day:

For some perspective on the all-important earnings environment, today’s chart illustrates ‘as reported’ S&P 500 earnings growth (i.e. 12-month rate of change) since 1940.

There are a couple of points of interest. For one, earnings growth has tended to peak in the 20 to 40% range and trough somewhere in the -10 to -20% range. At least that was the case up until this millennium. Since the dot-com crash (i.e. the 2001 – 2002 timeframe), earnings growth volatility has increased dramatically.

In fact, the post-financial crisis spike to 793% is not even shown on today’s chart so as to allow the rest of the data to remain visible (i.e. not flattened out). It is worth noting that this historic post-financial crisis earnings growth spike is due in large part to the fact that earnings came in so low as a result of the financial crisis. Currently, earnings growth has just moved into positive territory but remains well below average.

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Notes:
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Chart of the Day: Surging Home Prices

Via Chart of the Day:

The US real estate market continues to surge. For some perspective, today’s top chart illustrates the US median price (adjusted for inflation) of a single-family home over the past 43 years while today’s bottom chart presents the annual percent change in home prices (also adjusted for inflation).

Today’s chart illustrates that the inflation-adjusted median home price has rarely increased more than 7.5% in one year (gray shading). When inflation-adjusted home prices did increase more than 7.5% in one year, it was often soon followed by a period of stagnant or declining prices. The exception to this occurred during the credit bubble (2001 and 2002). It is worth noting that over the past 12 months, the median price for a single-family home has shot up at the fastest pace on record.

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Notes:
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Chart of the Day: Post-Massive Bear Market Rallies

By Chart of the Day

Today’s chart illustrates rallies that followed massive bear markets. For today’s chart, a ‘massive’ bear market is defined as a decline of greater than 50%. Since the Dow’s inception in 1896, there have been only three bear markets whereby the Dow declined more than 50% (early 1930s, late 1930s until early 1940s, and during the recent financial crisis).

Today’s chart also adds the rally that followed the dot-com bust during which the Nasdaq declined 78%. The current Dow rally has followed the post dot-com bust rally of the Nasdaq that began back in 2002 fairly closely and held to a general post-massive bear market rally pattern — rally during the first 300 trading days, trade in a relatively flat choppy manner up until around 600 trading days and then re-embark on the second leg of the rally. History may not repeat, but it rhymes.

Notes:
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Chart of the Day: Weak Post-Election Year Stock Performance

By Chart of the Day

Today’s chart illustrates how the stock market has performed during the average post-election year. Since 1900, the stock market has tended to underperform from early January to late February and again from early August to early November during the average post-election year.
Some parts of the year have, on average, outperformed. The most notable period of outperformance has occurred from late March to late May. In the end, however, the stock market has tended to underperform during the entirety of the post-election year.

One theory to support this behavior is that the party in power will tend to make the more difficult economic decisions in the early years of a presidential cycle and then do everything within its power to stimulate the economy during the latter years in order to increase the odds of re-election.

 

Notes:
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The Jobs Disaster – the Long View

By Chart of the Day

Today, the Labor Department reported that nonfarm payrolls (jobs) increased by 80,000 in June. Today’s chart provides some perspective in regards to the US job market. Note how the number of jobs steadily increased from 1961 to 2001 (top chart). During the last economic recovery (i.e. the end of 2001 to the end of 2007), job growth was unable to get back up to its long-term trend (first time since 1961).

More recently, the number of nonfarm payrolls has been working its way higher but at a pace that is not fast enough to close the gap on its 1961 to 2001 trend. It is interesting to note that the current number of US jobs recently surpassed its 2001 peak. However, if this month’s pace of 80,000 new jobs were to continue for each and every month going forward, the 2008 peak would not be reached until the third quarter of 2017.

 


Notes:
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OIL – THE LONG VIEW….

By Chart of the Day

Today’s chart provides some long-term perspective on the price of a barrel of crude oil with a long-term chart of inflation-adjusted West Texas Intermediate Crude. Today’s chart illustrates that most oil price spikes coincided with Middle East crises and often preceded or coincided with a US recession.
The logic behind this is that a Middle East crisis can potentially disrupt an already tight oil supply and thereby drive crude oil prices higher. Also, rising oil / energy prices can, among other things, increase costs within the global economy’s supply / distribution chain and thereby contribute to inflation which can in turn encourage governments to halt or reduce any plans to stimulate the economy. As a result of a slowing global economy as well as increased global oil production, crude oil prices have declined over 20% since early May alone.

Notes:

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POST-MASSIVE BEAR MARKET RALLIES

By Chart of the Day

Today’s chart illustrates rallies that followed massive bear markets. For today’s chart, a ‘massive’ bear market is defined as a decline of greater than 50%. Since the Dow’s inception in 1896, there have been only three bear markets whereby the Dow declined more than 50% (early 1930s, late 1930s until early 1940s, and during the recent financial crisis). Today’s chart also adds the rally that followed the dot-com bust during which the Nasdaq declined 78%.

The current Dow rally has followed a somewhat middle of the road path and has followed the post dot-com bust rally of the Nasdaq that began back in 2002 fairly closely — especially over the past year. If the current rally were to continue to follow the post-massive bear market rally pattern, the market would have to work its way higher during much of the remainder of 2012.

 

Notes:
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