The chart below is from our monthly Financial Headlines report which is published at the end of each month. This report provides a handy refresher of major events that have occurred over the last seven months as well as an annotated intraday chart of the S&P 500 showing the major daily headlines and how each one impacted the market. This report is available to all Bespoke Premium and Bespoke Institutional clients, and from feedback we have received it is a great reference tool to look back on when clients are looking to see what was driving the markets at different periods of time. More importantly, it also helps to put things in perspective as what often seems like a major trend today is nothing more than just noise that is often forgotten about just a few months later.
Looking at the last seven months of trading, for example, shows how quickly consensus thought can change. At the end of last year, the Japanese economy had slipped into recession, hiring in the US was the strongest since 1999, and US economy was picking up momentum. Today, the Nikkei just ended its longest winning streak since 1988 and “Slowing Job Growth Tests Economy.” As a result of the slowing economic data, a June rate hike which was ‘in play’ just three months ago has now been ‘shied’ away from.
As mentioned above, we are often told by clients that the monthly Financial Headlines report is a great reference tool to look back at what was driving markets at other periods in the past. With that in mind, the chart below shows the seven-month annotated chart from six years ago in May 2009. Looking at this chart makes the concerns of today seem trivial. Today, the big worries surround a possible slowdown in the economy. Back then, economic activity was collapsing at the fastest rate since 1982 and many investors were concerned over whether there would even be an economy. Today, monthly auto sales for May are expected to come in at or near their highest levels in a decade, but six years ago automakers were on their heels and on the verge of bankruptcy.
Even though a lot has changed over the last seven years, one thing that hasn’t is interest rates. At the end of 2008, the Fed began its policy of zero interest rates, which is exactly where the Fed Funds rate sits today. Long-term treasury rates haven’t changed either. At the end of 2008, the yield on the 10-year treasury was at 2.21%, which is exactly what it was yielding earlier today.
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