ARTICLES

New Record on the S&P

24 April 2019 By PDSNET

Seven months ago on 20^th September 2019, the S&P made a new record high at 2930 – and from that level began a correction. Corrections are completely normal and even healthy events which occur regularly during the course of a bull trend. This ten-year bull trend began on 6^th and 7^th of March 2009 when the S&P made an intra-day low of 666.79 on 6^th and then made its lowest close at 676.53 on 7^th. The fall in the market had been caused by an American banking crisis which later became known as the “sub-prime crisis" when Lehman Brothers collapsed. What followed was an inordinate monetary policy stimulation of the world economy during which more than $12 trillion worth of quantitative easing (QE) was done to try to avoid a repeat of the Great Depression of 1929. Ten years later we can say that the QE was successful and the world economy has eventually turned around – but not without some very scary moments such as the Greek crisis during which it looked as though the entire European Union was in danger. Last night’s close on the S&P at 2933 signals the end of the 4^th major correction in the bull trend. These were:

1. An 8-month correction in 2010 of 16%.
2. A 10-month correction in 2011/12 of 19,4%
3. A 13-month correction in 2015/16 of 14,1%
4. A 7-month correction in 2018/19 of 19,8%

Consider the chart:

S&P500 Index 2009 to 2019 - Chart by ShareFriend Pro (Click to Enlarge Image)

The most recent correction was both the shortest and the deepest of these corrections – more like a “V bottom" - and much of it was caused by Donald Trump’s rhetoric over the Christmas period when very few investors were active in the market. We never had any doubt that it was a correction and not the start of a new bear trend – mainly because the US economy, which is the engine that ultimately drives the stock market, was performing so well. Indeed, last night’s surge on Wall Street came about because of a slew of above-expectation results from S&P500 companies. Coca Cola and United Technologies reported better-than-expected results while Twitter shares jumped over 15% on their results as they added 330 million new active users. Lockheed Martin and Procter & Gamble also beat expectations. Altogether, so far, 78% of the more than 140 S&P500 companies that have reported have beaten expectations. The only real negative is the oil price which has been trending up steadily. Of course, there is the outside possibility that what we are seeing is a “double top” on the S&P, but as we have been saying right through this correction, we believe that what we are looking at is a solid resumption of the great bull market which began 2009. JSE shares are following Wall Street up and should continue to do so.  

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:

PDSNET ARTICLES

Bubble

Last Friday the S&P500 reached another new all-time record high, closing at 6791 and reaching a new intra-day record high of 6807. This is obviously an exciting time for private investors, but with each new record high the systematic risk of a bear trend or crash increases. Consider the chart:

The PEG Ratio

Since the government of national unity (GNU) came into power in June 2024, there has been a definite improvement in the South African economy. Perhaps the improvement is not as dramatic as some people were expecting, but the progress cannot be denied.

Possibly the best indicator of that is the 28% rise in the JSE Banking index which, before the GNU had

Rare Earth Elements

Investors worldwide had been of the opinion that Trump’s ability to impact markets was on the decline. His erratic, on-again, off again tariff policies had either disappeared or had been mostly discounted into share prices. His attack on the second largest economy in the world, China, seemed to have been largely resolved, and a meeting with

US Shutdown

There has been much in the media recently about the US government shutdown and the fear among investors that it might begin to affect the stock market, depending on how long it lasts.

A shutdown occurs when the US government reaches its budget limit and requires a bill to be passed through both Houses to extend the government’s spending limits.

New Listings

Two new companies, ASP Isotopes and Greencoat Renewables, have recently come to the JSE. Both are developing companies that have recently made losses and have been funding those losses by raising capital and selling assets. They both have substantial “blue sky” potential but also carry substantial investment risk. This is probably truer of ASP

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments