Weekly S&P500 ChartStorm - 18 June 2023
This week: liquidity, seasonality, peaking pessimism, IPO mood, AI Hype: NVIDIA, NFT to GPT, semi sales, value vs growth, Nasdaq vs bond yields, recessions, ETF chasing...
Welcome to the latest Weekly S&P500 #ChartStorm!
Learnings and conclusions from this week’s charts:
One explanation of the surge in stocks has been the combination of bank bailout (liquidity), seasonal tailwinds, and AI hype — meeting excess pessimism.
The shift in sentiment, reduced volatility, and rebound in valuations has made it a friendlier environment to raise equity via IPO.
The AI hype cycle echoes some of the previous hype cycles in markets, and while bullish for now, also leaves the market vulnerable to correction.
There has been an unusually low number of recessions in recent years, potentially leaving investors ill-prepared on how to navigate such an environment.
Leveraged ETFs (assets and trading volumes) show how bullish speculation is returning, and FOMO performance chasing is heating up.
Overall, the market is currently swept-up in a self-reinforcing dynamic of hype and speculation vs previous persistent pessimism and light positioning. The FOMO performance chase is on as the big bear shakeout runs its course. At this point bulls are brimming with hope of a new bull market, while bears hold hope that this is just a hype-filled temporary shake-out/blow-off-top phase…
1. BTFP: Is it all just as simple as liquidity go up = stock go up?
Source: NewEdge Wealth
2. A Season for Lower VIX: While there are certainly other factors at play (lower realized volatility, bank bail out, bullish sentiment), the calming of the VIX is coinciding with the typical seasonal trend. But it is well worth noting that the seasonal trend turns in July (and the monetary wall looms in H2).
3. Peak Pessimism: A key ingredient for the bull run in stocks off the October 2022 lows has been deep and persistent pessimism — add to that so-far relative economic resilience vs recession forecasts, the bank bail-out, and AI hype (more on this point later), and you have the makings of a big bear shake-out.
4. IPO Issuance Barometer: The shift in sentiment, reduced volatility, and rebound in valuations make for a friendlier environment to raise equity via IPO. Basically you don’t want to be raising in a bear market unless you absolutely have to. Despite that though still miles off the crazy frenzy of 2021.
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