Some Market Stats

The market is having nice rebound today. The Dow is currently up 500 points. Measuring from Friday’s low, it’s up 1,350 points.

Here are several great stats from this Bloomberg article. Normally, I would use blockquotes, but there are so many good nuggets here:

Even after the rout, the math shows the S&P 500 remains less attractive than it has been 82 percent of the time since the index bottomed in 2009 when compared with yields on U.S. Treasuries.

Currently, the S&P 500’s earnings yield is around 6 percent, 3.1 percentage points more than the 10-year note. The post-crisis average has been 4 points.

So far, the S&P 500 has tumbled in seven of the 10 past days, and plunged into a correction (loosely defined as a 10 percent drop) faster than any time since 1950. In doing so, the index has blown through three round-number milestones, as well as technical support levels indicated by its 50-, 100- and (briefly) 200-day moving averages.

At 16.8 times forecast earnings, the S&P 500’s valuation multiple is now down from a high of 20 in late December. That’s one of the fastest declines since 2009, but it has yet to bring P/Es in line with the average ratio of 15.5 that marked the bottom of the last two corrections. To get there, the S&P 500 would have to fall to 2,417. That’s roughly 8 percent below Friday’s closing level.

Stocks still look cheap to Treasuries when viewed from a wider lens. The current yield spread is more than double the average since 1990 and compares with 2.66 percentage points since 2000. But a rise in 10-year yields to just 3.65 percent (from about 2.85 percent now) would reduce the equity advantage to the 20-year average.

The S&P 500 would have to fall to 2,417 for the P/E Ratio to reach 15.5, which marked the low of the last two corrections.

And this from MarketWatch:

“There have been 16 drawdowns of 10%+ since 1976. Of the 16 corrections, only five occurred around a recession,” Goldman wrote. “Of the remaining 11 non-recession episodes, 1987 was the only one that turned into a bear market.”

During the three months following past corrections, materials have beaten the S&P 500 by a median of 270 basis points. Industrials beat the index in 73% of the periods at a 270-basis point median. Telecom is the worst pick post-correction, lagging the S&P 500 in 64% of periods by a median of 410 basis points, Goldman found.

Low valuation and small-cap stocks historically perform best following a 10% decline, Goldman noted, with its valuation factor handing over a return 63% of the time at 350 basis points on average. Additionally, high volatility beats low volatility in a post-correction environment: low volatility lagged high volatility by 610 basis points on average in 87% of post-correction periods.

Posted by on February 12th, 2018 at 1:59 pm


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