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 + larger earnings.
As such, investor sentiment notched up new bullish report highs.
And valuation indicators moved additional into costly territory.
General, it was a 12 months that featured all of the hallmarks of a raging bull market. However heading into 2025, expectations are operating sizzling, and the hurdles for a 3rd calendar 12 months in a row of 20%+ good points are excessive. As I talk about, it’s potential that the bull market retains retaining on larger for longer, however we want to consider chances vs potentialities.
1. Glad New 12 months!
The closed 2024 up a stable 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 each day closing excessive, and comfortably above the 12 months’s low.
Supply: Topdown Charts
2. Return Rankings
Whereas the S&P 500 (US Massive 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 significantly sturdy vs negatively returning treasuries.
Supply: Asset Class Returns
3. The 12 months in VIX
As for the , regardless of a big however short-lived flare-up in early-August (following the BOJ charge hike and 25% crash in Japanese shares), the typical closing VIX worth in the course of the 12 months was decrease in 2024 vs 2023 — and continued the clearly cyclical development of calming. Ultimately, this cycle will flip again up once more, however for now we’re transferring additional by way of the calming part.
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 right down to a 17-year low, stunning each by way of the headline but additionally in realizing that the monetary disaster was 16-years in the past! On a critical observe that is moving into complacency territory: little or no credit score threat premium on provide right here.
Supply: Credit score Spreads at 17-12 months Lows
5. Value vs Earnings
It could be incomplete to solely present worth, so right here’s a examine on how earnings have moved. Earnings definitely improved in the course of the 12 months (see why/how on the subsequent chart), however as we’ll see later within the pack — worth moved larger 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 progress in 2024 was tech shares (TMT = Know-how, Media, Telecommunications). Curiously TMT over the previous couple of years has been the important thing driver each up and down, and we must always anticipate additional draw back episodes like that sooner or later as TMT corporations mature and turn out to be more and more cyclical.
In the meantime, non-tech earnings have gone sideways for 3 years. It leaves me questioning which of those two traces have essentially the most potential to shock (up or down) — the bear case could be TMT catch-down, the bullish rotation case could be non-tech catch-up.
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