Market report

Hoping for seasonality, central banks on buying strike, markets heavily oversold, the U.S. is showing everyone.

October 3, 2022
Hoping for seasonality, central banks on buying strike, markets heavily oversold, the U.S. is showing everyone.

Chart of the week

Source: Isabelnet, 28.09.2022

The chart shows the average return of each month on the US stock market. Different colors show the average return since 1950, the last 20 and 10 years and the one in mid-term election years.

Why this is important

In all observation periods, October to December are the best stock market months. Actually, only Putin and his war in Ukraine can still prevent this.

Source: Twitter, Jurrien Timmer, Fidelity, @TimmerFidelity, 29.09.2022

Ein Grund für den beispiellosen Anstieg der Zinsen in den USA liegt auch darin, dass keine Anleger mehr US-Staatsanleihen kaufen. Die Grafik zeigt die grössten Käufer von US-Staatsanleihen. Seit 2008 haben die US und Japanische Notenbank, aber auch Privatanleger regelmässig Staatsanleihen gekauft. Die USA konnten ihr  Staatsdefizit mühelos finanzieren. Alle Käufe sind jetzt eingebrochen.

Source: Isabelnet, 27.09.2022

The chart shows that the 4 largest central banks in the world (USA, Europe, Japan and China) are massively reducing their balance sheets. The increase of the balance sheets was mainly done by buying government bonds or shares. This demand is now completely eliminated.

Source: Isabelnet, 27.09.2022

The chart shows the yield on 6-month government bonds in the USA compared with the earnings yield on equities. For the first time since 2008, the yield on government bonds is higher than that on equities. So for private investors, buying government bonds is an alternative for the first time since 2008. However, it cannot be assumed that private investors have enough volume to bring the markets into line.

Source: Isabelnet, 27.09.2022

The chart shows how long it has taken in each country since 1980 for inflation to fall back below 2% after being above 5%. Even in the most optimistic case, it took 3 years. So investors need to be prepared for inflation above 2% for a longer period of time and adjust their investment strategy accordingly.

Strongly oversold markets

Source: YouTube Markus Koch Wall Street from 26.09.2022, Time Stamp: 05.08

The chart shows the number of put options bought by private and institutional investors. Currently, the highest level in the history of the US stock market index S&P 500 has been reached. This cannot go well and should lead to a strong rebound.

Source: YouTube Markus Koch Wall Street from 26.09.2022, Time Stamp: 02.56

The chart shows how extraordinary the current situation is. It has only happened 4 times since 1928 that the stock market in the USA has had a negative monthly return lower than -3% more than once in a row.

Source: Isabelnet, 28.09.2022

In the current stock market situation, investors are avoiding risky assets and shifting into risk-free assets or cash. There have been lower values, but under normal circumstances a counter-reaction to risky assets is now due.

The USA shows it to all

Source: Isabelnet, 26.09.2022

Additional image sources: Initial graphic Designed by Freepik

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