This week: yearly charts, efficiency stats, and volatility, credit score spreads, earnings, tech shares, investor sentiment, market valuations, and a bizarre different indicator.
Learnings and conclusions from this week’s charts:
- The S&P500 closed 2024 up 23.3% (25% together with dividends).
- This put US massive caps on prime (vs different property) in 2024.
- This was accompanied by decrease common volatility + greater earnings.
- As such, investor sentiment notched up new bullish file highs.
- And valuation indicators moved additional into costly territory.
Total, it was a 12 months that featured all of the hallmarks of a raging bull market. However heading into 2025, expectations are operating scorching, and the hurdles for a 3rd calendar 12 months in a row of 20%+ good points are excessive. As I talk about, it’s doable that the bull market retains retaining on greater for longer, however we’d like to consider possibilities vs prospects.
1. Glad New Yr!
The closed 2024 up a strong 23.3% for the 12 months (25% together with dividends). The model closed up a nonetheless respectable however a lot decrease 10.9% (13% together with dividends). Because the annual chart under reveals, the S&P 500 closed a contact under the 12 months’s day by day closing excessive, and comfortably above the 12 months’s low.
Supply: Topdown Charts
2. Return Rankings
Whereas the S&P 500 (US Giant Caps) misplaced floor on the month in December, it was on the prime of the desk of mainstream asset lessons; properly forward of EM/Frontier/Developed equities, small caps, money, commodities, and notably robust vs negatively returning treasuries.
Supply: Asset Class Returns
3. The Yr in VIX
As for the , regardless of a major however short-lived flare-up in early-August (following the BOJ price hike and 25% crash in Japanese shares), the typical closing VIX worth through the 12 months was decrease in 2024 vs 2023 — and continued the clearly cyclical pattern of calming. Finally, this cycle will flip again up once more, however for now we’re transferring additional by means of the calming section.
Supply: Topdown Charts Skilled
4. VIX vs Credit score Spreads
And it wasn’t simply the VIX, US excessive yield credit score spreads (aka junk bonds) squeezed all the way down to a 17-year low, stunning each when it comes to the headline but additionally in realizing that the monetary disaster was 16-years in the past! On a critical word that is entering into complacency territory: little or no credit score danger premium on provide right here.
Supply: Credit score Spreads at 17-Yr Lows
5. Worth vs Earnings
It might be incomplete to solely present value, so right here’s a verify on how earnings have moved. Earnings definitely improved through the 12 months (see why/how on the subsequent chart), however as we’ll see later within the pack — value moved greater than earnings. in different phrases, valuation multiples elevated (and from already excessive ranges).
Supply: ChartStorm – Views Pack
6. Tech vs Non-Tech Earnings
The important thing driver behind earnings development in 2024 was tech shares (TMT = Expertise, Media, Telecommunications). Apparently TMT over the previous couple of years has been the important thing driver each up and down, and we should always anticipate additional draw back episodes like that sooner or later as TMT corporations mature and turn into more and more cyclical.
In the meantime, non-tech earnings have gone sideways for 3 years. It leaves me questioning which of those two strains have probably the most potential to shock (up or down) — the bear case can be TMT catch-down, the bullish rotation case can be non-tech catch-up.
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