GLOBAL ECONOMICS AND POLITICS

Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.

 

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US STOCKS OVER THE LONG RUN: BEAR MARKETPLACE HISTORY © Leo Haviland, August 4, 2023

“It’s déjà vu all over again!”, declared Yogi Berra, a famous baseball star.

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OVERVIEW AND CONCLUSION

Given the great significance of the United States within the global economy, both Wall Street and Main Street spend much attention and energy focusing on the American economic scene. Benchmark American stock indices such as the S+P 500 and Dow Jones Industrial Average to some extent probably reflect the overall health of and potential for the American economy. 

United States stock marketplace trends and phenomena intertwine with those of other global stock arenas. Prices and trends for (and assorted other economic, political, and social variables influencing) US signpost stock indices such as the S+P 500 and Dow Jones Industrial Average interrelate with those of key American and global interest rate, currency, commodity, real estate, and other economic domains. History reveals that these cultural relationships can and do change, sometimes slowly, sometimes rapidly. Convergence and divergence (lead/lag) patterns between marketplaces can and do shift or transform. 

Price levels and trends for these key American equity marketplaces therefore attract and sustain widespread and domestic international attention. 

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US interest rate, dollar, commodity, real estate, and other marketplace trends entangle with and influence American stock trends. 

“Long Run Historical Entanglement: US Interest Rate and Stock Trends” (7/6/23) concluded: “Many times over the past century, significantly increasing United States interest rates have preceded a major peak, or at least a noteworthy top, in key stock marketplace benchmarks such as the Dow Jones Industrial Average and S+P 500. The yield climb sometimes has occurred over a rather extended time span. The arithmetical (basis point) change has not always been large. Sometimes the yield advance has extended past the time of the stock pinnacle.”

“Given the historic pattern in which UST [US Treasury; focus on the UST 10 year note] yield increases “lead” to peaks in key American stock benchmarks such as the S+P 500, do signs of a noteworthy rising yield trend exist on the interest rate front? Yes.” And “the pattern of rising UST 10 year note yields likely is leading to another peak in the S+P 500. This stock marketplace peak probably will occur relatively soon, probably within the next few weeks or months. However, even if the S+P 500 continues to climb, it probably will not exceed its January 2022 peak by much if at all.” 

The UST 10 year note yield broke through 3/2/23’s 4.09 percent interim high with 8/3/23’s 4.20 percent high. It thus is approaching 10/21/22’s 4.34 percent top, attained around the time of the S+P 500’s crucial trough on 10/13/22 at 3492. 

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Given the importance of price trends in widely watched US equity indices such as the S+P 500 and Dow Jones Industrial Average, stock and other marketplace players and observers should review and assess long run bear (and bull) marketplace history for those American benchmarks. 

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FOLLOW THE LINK BELOW to download this article as a PDF file.
US Stocks Over the Long Run- Bear Marketplace History (8-4-23)

CRAWLING FROM THE WRECKAGE: US STOCKS © Leo Haviland, April 13, 2020

“Crawlin’ from the wreckage, Crawlin’ from the wreckage
You’d think by now at least that half my brain would get the message…
Nothin’ ever happened ain’t happened before
I see it all through flashes of depression”. “Crawling from the Wreckage”, a Dave Edmunds song

“We’ve not seen anything of the sort before, that’s all. Personally, I find it interesting, yes, definitely interesting.” A character in Albert Camus’ novel “The Plague” (Part I)

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CONCLUSION

Everyone knows that the coronavirus pandemic and political (medical) responses to it have wreaked widespread and deep economic carnage around the globe. The coronavirus of course was not the only bearish phenomenon preceding and influencing the disastrous economic situation. The ultimate extent of the damage and the timing and extent of the recovery remain conjectural. 

Given the importance of the United States to the international economy, both Wall Street and Main Street spend much attention and energy focusing on America. Widely-watched American stock indices such as the S+P 500 and Dow Jones Industrial Average are benchmarks which to some extent probably reflect the overall health of and potential for the American economy. Thus in the current situation, levels and trends for these American equity marketplaces attract and sustain international fascination.  

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To many, the biological (medical) problem of the coronavirus makes it a poster child for the viewpoint that “this time is different” in its consequences for economic (financial, commercial) trends and outcomes. Obviously, disease playing a critical role in a terrible downturn is very rare. Yet economic history (including recessions and bear and bull trends in stock marketplaces) involves all sorts of “causes” with supply and demand consequences, so observers should not neglect or dismiss past periods as being unimportant to an analysis of the current economic situation. So arguably there are parallels between prior marketplace history and that of nowadays, even if “the past” did not involve a deadly virus. 

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Wall Street, politicians, and Main Street pray that the monumental monetary interventions by central banks such as the Federal Reserve and its partners (money printing and so forth) and dramatic fiscal actions not only will rescue the international economy from its current dire troubles (reduce the magnitude of a recession), but also will restore acceptable economic growth relatively quickly. The prior success in dealing with the appalling worldwide economic disaster of 2007-09 encourages widespread faith that these (and perhaps further) efforts and a “whatever it takes” policy attitude ultimately will succeed. 

Recall the glorious bull move in the S+P 500, sparked by sustained monetary easing (money printing; yield repression) and deficit spending, which ran for over ten years since 3/6/09’s major bottom at 667. Perhaps US stocks over some long run horizon (or even sooner) even will achieve new record highs! 

But maybe this time will be different for the global economy and stocks in comparison with the years following from the 2007-09 bloodbath. A satisfactory recovery (including moderate unemployment levels) may be very difficult to achieve anytime soon, even if more easing and deficit spending occur. 

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The S+P 500’s fearful collapse from 3394 on 2/19/20 to 3/23/20’s 2192 was 35.4 percent and lasted just over a month. Following its March low, the S+P 500 ferociously rallied 28.6 percent in two weeks to 2819 (4/9/20). A review of previous major bear trends for the US stock marketplace going back in time about 125 years does not show a single trend which ended in one month. Will this time be different? 

Will the extraordinarily accommodative policies of the Federal Reserve and its central banking comrades (assisted by gargantuan global deficit spending) make this time different, so that the bear trend for American stocks which commenced in mid-February 2020 endures only one month? Or, will instead the 3/23/20 S+P 500 low eventually be broken?

FOLLOW THE LINK BELOW to download this article as a PDF file.
Crawling from the Wreckage- US Stocks (4-13-20)