Weekly S&P500 ChartStorm - 3 July 2022

Callum Thomas

Topdown Charts

The Weekly S&P500 ChartStorm is a selection of 10 charts that I handpicked from around the web and from Twitter posts. The purpose of this wire is to add extra colour and commentary around the charts.

The charts focus on the S&P500 (US equities); and the various forces and factors that influence the outlook - with the aim of bringing insight and perspective...

1. Happy new month! It's been pretty much a round trip for the S&P 500 index in inflation adjusted terms at this point. Up the escalator, down the elevator.

2. YTD returns in context: H1 2022 was one of the worst first halves of the year in history for the S&P500, but it was not a lonely journey...

Basically nothing worked outside of cash and commodities.

3. Stocks versus bonds: Interesting table to reflect on — over the period covered in this table, 60/40 always bet 100% stocks when stocks were down for the year, albeit “YMMV” with regards to *absolute returns*.....

4. Bond yields as seen by stocks: Seems like "equities for rising rates" had their doubts on how far 10-year yields could go. Looks like the ceiling may be in for bond yields?

Source:  @AlfCharts
Source: @AlfCharts

5. Financial conditions: The key point to note on this one, as the always excellent SoberLook remarked: "tighter financial conditions require higher compensation for investors to take on risk"

i.e. valuations have to not just mean-revert, but go to a level where it compensates for the risks of excess policy tightening and global recession.

Source:  @SoberLook
Source: @SoberLook

6. Stock losses in context: This one is actually low-key shocking — US equity market drawdown is equivalent of -46% of US GDP, that's massive.

(i.e. speaking of financial conditions!)

7. Easy-peasy margin-squeezy: Looks like a margin squeeze is incoming...

(recession will hit demand, inflation: input costs)

Source:  @TaviCosta
Source: @TaviCosta

8. Earnings outlook: Another perspective on the outlook for corporate margins, this time looking at operating margins and cost pressures -- either way you cut it, the outlook for earnings is not good...

Earnings FUD is real. Expect more downgrades.

Source:  @JulianMI2
Source: @JulianMI2

9. Who owns the market: Probably a few surprises in there for those who haven't seen this type of breakdown before...

Source:  @Ksidiii
Source: @Ksidiii

10. Long-term perspective: "Stocks for the Long-Term"*

*(n.b. beware of occasional lost-decade(s))

Thanks for reading!

Callum Thomas, founder and head of research at Topdown Charts.

Any feedback, questions and views are welcome in the comment section below.

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Callum Thomas
Head of Research
Topdown Charts

Callum is Head of Research at Topdown Charts. Topdown Charts is a chart-driven macro research house covering global Asset Allocation and Economics.

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