Stock Market Handbook

Transcription

1 Stock Market Handbook May 11, 212 Dr. Edward Yardeni Sailesh S Radha jabbott@ Please visit our sites at www. blog. thinking outside the box

2 Table Of Contents Table Of Contents Presidential Cycles 1-2 S&P 5 Performance 3-5 ISM Super Composite Index 6-7 Consumer Comfort Index 8 Januaries & Annual S&P 5 Returns 9 New Charts 1-11 Dow Jones Index S&P 5 Forward P/E & Expected Inflation 14 Bull Markets -17 Bear Markets 18 Bull/Bear Ratios of 1. or Less & Bull Markets 19-2 May 11, 212 / Stock Market Handbook www.

3 Figure 1. - Presidential Cycles - S&P 5 INDEX & FIRST YEAR OF A PRESIDENT S TERM: 1952-present (Average = 4.4%) Apr % * Shaded vertical lines are the first year of a President s term. Data above timeline shows Dec/Dec percentage change using end of month data Figure 2. S&P 5 INDEX & SECOND YEAR OF A PRESIDENT S TERM: 1952-present (Average = 5.4%) Apr % * Shaded vertical lines are the second year of a President s term. Data above timeline shows Dec/Dec percentage change using end of month data. Page 1 / May 11, 212 / Stock Market Handbook www.

4 Figure 3. - Presidential Cycles - S&P 5 INDEX & THIRD YEAR OF A PRESIDENT S TERM: 1952-present (Average = 17.2%) Apr % = * Shaded vertical lines are the third year of a President s term. Data above timeline shows Dec/Dec percentage change using end of month data Figure 4. S&P 5 INDEX & FOURTH YEAR OF A PRESIDENT S TERM: 1952-present (Average = 5.7%) Apr % * Shaded vertical lines are the fourth year of a President s term. Data above timeline shows Dec/Dec percentage change using end of month data. Page 2 / May 11, 212 / Stock Market Handbook www.

5 Figure S&P 5 Performance - C C C C C C C C C C 35 S&P 5 INDEX PERFORMANCE 3/6/12 MONTHS AFTER FIRST FED RATE CUT m -.9% 6-m 1.4% 12-m 11.5% 3-m -13.6% 6-m -13.9% 12-m 13.6% 3-m -2.% 6-m 1.% 12-m -2.7% 3-m 19.5% 6-m 34.% 12-m 34.4% 3-m -8.3% 6-m -5.8% 12-m -16.% 3-m 2.3% 6-m 11.7% 12-m 13.8% 3-m 1.3% 6-m 4.6% 12-m 11.% m 21.8% 6-m 29.4% 12-m.9% 3-m 11.4% 6-m 16.% 12-m 17.5% 3-m 9.5% 6-m 8.6% 12-m 13.9% C= Federal funds rate first cuts in easing cycle. Boxes show 3/6/12 month percent changes in S&P 5 following first rate cut. From 1971 thru June 1981 using monthly lowest value for S&P 5 during month of first rate cut Figure 14. C C C C S&P 5 INDEX PERFORMANCE 3/6/12 MONTHS AFTER FIRST FED RATE CUT 5/ m 5.1% 6-m 11.3% 12-m 17.8% 3-m 18.4% 6-m 24.9% 12-m 2.9% 3-m -4.3% 6-m -12.4% 12-m -2.6% m -17.9% 6-m -8.4% 12-m 13.5% C= Federal funds rate first cuts in easing cycle. Boxes show 3/6/12 month percent changes in S&P 5 following first rate cut. 5 3 Page 3 / May 11, 212 / Stock Market Handbook www.

6 - S&P 5 Performance - 2 Figure. S&P 5 INDEX: average change each month (66 years) 1.83% % 1.43% 1.18% 1 1.3%.9%.91% 1.3% -.4% -.16% -.37% % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Updated through April Figure 16. S&P 5 INDEX: average of gain years each month (66 years) % 2.38% 3.19% 3.54% 2.95% 2.63% 4.% 3.11% 3.% 3.84% 3.9% 2.99% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Updated through April Page 4 / May 11, 212 / Stock Market Handbook www.

7 - S&P 5 Performance Figure 17. S&P 5 INDEX: average of loss years each month (66 years) % -2.1% % -3.19% -2.89% -3.8% -2.88% -2.77% -4.8% -3.86% -3.59% -3.29% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Updated through April Figure 18. S&P 5 INDEX: # of months up each month (66 years) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Updated through April Page 5 / May 11, 212 / Stock Market Handbook www.

8 1 13 Figure ISM Super Composite Index - ISM SUPER COMPOSITE INDEX vs. CONSUMER OPTIMISM INDEX Apr Apr ISM Super Composite Index* Consumer Optimism Index** * Sum of ISM manufacturing composite and ISM nonmanfacturing composite. ** Average of Conference Board and University of Michigan measures. Source: Institute for Supply Management (ISM), the Conference Board and University of Michigan Survey Research Center Figure 2. CONSUMER OPTIMISM INDEX vs. S&P 5 Consumer Optimism Index* S&P 5 Index Apr * Average of Conference Board and University of Michigan measures. Source: The Conference Board and University of Michigan Survey Research Center and Standard & Poor s Corporation. Page 6 / May 11, 212 / Stock Market Handbook www.

9 1 13 Figure ISM Super Composite Index - ISM SUPER COMPOSITE INDEX vs. S&P 5 INDEX Apr ISM Super Composite Index* S&P 5 Index * Sum of ISM manufacturing composite and ISM nonmanfacturing composite. Source: Institute for Supply Management (ISM) and Standard & Poor s Corporation Figure 22. NATIONAL CONFIDENCE INDEX vs. S&P 5 INDEX National Confidence Index: Average of COI* and ISM Super Composite** Apr S&P 5 Index * Average of Conference Board and University of Michigan measures. ** Sum of ISM manufacturing composite and ISM nonmanfacturing composite. Source: Institute for Supply Management (ISM), The Conference Board, University of Michigan Survey Research Center and Standard & Poor s Corporation. Page 7 / May 11, 212 / Stock Market Handbook www.

10 - Consumer Comfort Index Figure 23. BOOM BUST BAROMETER vs. CONSUMER COMFORT INDEX US Boom Bust Barometer* Consumer Comfort Index (index plus ) 5/ * CRB raw industrials spot price index divided by initial unemployment claims, four-week moving average. Source: Bloomberg, Commodity Research Bureau, Department of Labor. 13 Figure 24. FUNDAMENTAL STOCK MARKET INDICATOR FSMI = Average of BBB* and Consumer Comfort Index 1 S&P 5 Index 5/ * CRB raw industrials spot price index divided by initial unemployment claims, four-week moving average. Source: ABC News/Washington Post, Commodity Research Bureau, Department of Labor and Standard & Poor s Corporation. Page 8 / May 11, 212 / Stock Market Handbook www.

11 3 Figure Januaries & Annual S&P 5 Returns - S&P 5 INDEX JANUARY EFFECT (percent change) January Entire Year Page 9 / May 11, 212 / Stock Market Handbook www.

12 Figure New Charts - S&P 5 INDEX: AVERAGE 1-MONTH UN-ANNUALIZED CHANGE FOR ALL YEARS * (percent) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -1. * Excludes January of 1946 and data is through April Figure 27. S&P 5 INDEX: MAY MONTH UN-ANNUALIZED CHANGE FOR ALL YEARS * (percent) * Data is through April 212 Page 1 / May 11, 212 / Stock Market Handbook www.

13 Figure New Charts - S&P 5 INDEX: ANNUAL CHANGE FOR 1-YEAR PERIODS ENDING IN MAY FOR ALL YEARS * (percent) * Data is through April Figure 29. S&P 5 INDEX: RANGE OF 1-MONTH UN-ANNUALIZED CHANGE FOR ALL YEARS * (percent) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 211 * Excludes January of 1946 and data is through April Page 11 / May 11, 212 / Stock Market Handbook www.

14 Figure 3. S&P 5 INDEX: NUMBER OF 1-MONTH HOLDING PERIODS UP OR DOWN FOR ALL YEARS * Up Months** Down Months - Dow Jones Index - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec * Excludes January 1946 and data is through April 212. ** No change (.%) month of September, 1979 counted as up month Figure 31. DOW JONES INDUSTRIALS AVERAGE PRICE INDEX ( ) Source: Dow Jones Inc. Page 12 / May 11, 212 / Stock Market Handbook www.

15 12 Figure Dow Jones Index - DOW JONES INDUSTRIALS AVERAGE ( ) (yearly percent change) Source: Dow Jones Inc Figure 33. DOW JONES INDUSTRIALS AVERAGE PRICE INDEX ( ) 5/ Source: Dow Jones Inc. 5 Page 13 / May 11, 212 / Stock Market Handbook www.

16 8 6 Figure S&P 5 Forward P/E & Expected Inflation - DOW JONES INDUSTRIALS AVERAGE ( ) (yearly percent change) / Source: Dow Jones Inc Figure 35. S&P 5 FORWARD P/E AND EXPECTED INFLATION 3 5/ /4 12 S&P 5 Forward P/E -1 1 Expected Inflation in 5-year TIPS* * Nominal minus TIPS yield. Source: Board of Governors of the Federal Reserve System and Thomas Reuters I/B/E/S. Page 14 / May 11, 212 / Stock Market Handbook www.

17 Figure Figure S&P 5 P/E vs. EXPECTED INFLATION +46.2% 19 months - Bull Markets % 28 months % 41 months +46.8% 5 months / S&P 5 INDEX / S&P 5 P/E* % 5 months Expected Inflation in 1-year TIPS** % 2 months % 23 months * Price divided by 52-week forward S&P 5 consensus INDEX expected operating earnings per share. ** Nominal minus TIPS yield. 14 Source: Board of Governors of the Federal Reserve System and Thomas Reuters I/B/E/S % months +75.2% 3 months +43.2% 12 months S&P 5 INDEX * Grey shaded areas are bull markets. 7 Page / May 11, 212 / Stock Market Handbook www.

18 - Bull Markets Figure % 12 months +119.% 34 months +55.7% 19 months S&P 5 INDEX % 14 months +79.8% 44 months +33.3% 11 months +23.5% 8 months 125 S&P 5 INDEX % 11 months +33.4% 14 months +53.5% 9 months +31.4% 12 months +23.1% 6 months +28.1% months S&P 5 INDEX * Grey shaded areas are bull markets. 6 Page 16 / May 11, 212 / Stock Market Handbook www.

19 - Bull Markets Figure % 8 months % 6 months months S&P 5 INDEX % 31 months % 43 months S&P 5 INDEX % 84 months +79.9% 14 months 5/ S&P 5 INDEX * Grey shaded areas are bull markets. 6 Page 17 / May 11, 212 / Stock Market Handbook www.

20 Bear Markets - Figure 4. T P T P T P -14.8% -9.4% -44.3% S&P 5 INDEX T P T -83.% -31.8% -54.5% -31.9% S&P 5 INDEX P T P T -31.9% -34.5% -13.1% -26.6% -2.6% S&P 5 INDEX * P/T = peaks and troughs of business cycle. Grey shaded areas are bear markets. 7 Page 18 / May 11, 212 / Stock Market Handbook www.

21 - Bull/Bear Ratios of 1. or Less & Bull Markets P P TP T P T P T P T P P P T -19.9% -28.% -14.8% -22.2% -19.2% -17.1% -27.1% -2.7% -33.5% -36.1% -19.9% S&P 5 INDEX -49.1% S&P (ratio 5 scale) INDEX P T P T P T P -56.8% T P T -36.1% -49.1% S&P % INDEX -19.4% -16.% -17.1% 5/1 S&P 5 INDEX * P/T = peaks and troughs of business cycle. Grey shaded areas are bear markets. S&P 5 INDEX vs. BULL/BEAR RATIO OF 1. OR LESS / Page 19 / May 11, 212 / Stock Market Handbook www.

22 Figure 6. Copyright (c) 212. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily DOW JONES complete INDEX and vs. BULL/BEAR its accuracy RATIO cannot be guaranteed. No representation or warranty, express OF or 1. implied, OR LESSis made as to the fairness, accuracy, completeness, or 5/1 correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. This report and the others posted on www. are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company s stock. Predictions, forecasts, estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed on any Yardeni Research, Inc. product, service, report, or website are proprietary to and constitute valuable intellectual property. No material from any part of www. may be downloaded, transmitted, broadcast, transferred, assigned, reproduced or in any other way used or otherwise disseminated in any form to any person or entity, without the explicit written consent of All unauthorized reproduction or other use of material from shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights. Green shaded areas indicates Bull/Bear Ratio equal to or less than 1.. Source: Wall Street Journal and Investors Intelligence. The recipient should check any and any attachments for the presence of viruses. accepts no liability for any damage caused by any virus transmitted by this company s s or website. Additional information available on request

23 - Bull/Bear Ratios of 1. or Less & Bull Markets - Page 2 / May 11, 212 / Stock Market Handbook www.