Market report

The inconspicuous goat beats the imposing dragon, spurious correlations, excellent company results - not a trace of recession.

February 13, 2024
3 min.
The inconspicuous goat beats the imposing dragon, spurious correlations, excellent company results - not a trace of recession.

Chart of the week

Source: Isabelnet, 10.02.2024

The chart shows in which phases of the Chinese zodiac the US stock market has the highest return. The blue bar shows the average return since 1950 and the yellow dot shows the maximum return ever achieved.

We are now entering the year of the dragon. As impressive as a dragon is, the returns in the year of the goat or ox were massively better.

Why this is important
At least once a year, we warn against spurious correlations in this market report. These are perfect correlations that make no rational sense. Nevertheless, there are always a large number of investors who fall for them.

In addition to the chart above, here are some examples:

Source: Tyler Vigen, 10.02.2024

The chart shows the perfect correlation between the consumption of margarine in the USA and the development of the share price of Alphabet, the company to which Google belongs.

Source: Endless Metrics, 27.04.2021

When discussing spurious correlations, you can't do it without the actor Nicolas Cage. The standard graph is the almost perfect correlation of the number of movies with Nicolas Cage and people drowning in their own pool per year. You can argue about Nicolas Cage's acting performance, at least his last movie, Dream Scenario, is worth seeing. That's why we're opting for a more positive view here.

If you add up all the films Nicolas Cage has ever made, there is an almost perfect correlation with the development of the US gross national product. We hope that Nicolas Cage makes many more films ;-)
But let's end with the stars:

Source:, Investieren nach Mondphasen, 26.06.2019

The chart shows that you have had a much better return over the past 90 years if you only ever invested in the S&P 500 during new moon phases. Very impressive, but you have to stand firm. This correlation cannot be explained.
If you look hard enough, you will always find perfect correlations. We definitely advise against using these as a means of investment.

With all the charts we use, we therefore always ask ourselves whether the correlations shown can be explained rationally.

Excellent company results - no sign of recession.
So far, 78% of all stocks in the S&P have published their earnings and issued forecasts for the course of the year.

Source: Twitter, Charlie Bilello, @charliebilello,  08.02.2024

The chart shows the operating EPS (operating earnings per share) of the S&P 500. It can already be seen that a new record has been reached.

Source: Twitter, Charlie Bilello, @charliebilello,  08.02.2024

The chart shows the earnings per share growth rate of the S&P 500. With an increase of 16%, things look excellent here too. Companies in America are doing well and the economy as a whole is booming. There is no sign of a possible recession so far.

Source: Twitter, Jesse Felder, @jessefelder, 10.02.2024

The chart shows the expected earnings sectors according to the valuation parameter "Forward P/E Ratio" of the S&P 500 (blue) and the comparison with the 25-year average. All sectors except energy and utilities are above the average of the last 25 years and are expected to continue rising.

Source: Twitter, Mike Zaccardi, @MikeZaccardi, 09.02.2024

Our biggest concern at the moment is market breadth. The market is only being driven upwards by very few companies. The Magnificant 7 (Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Meta Platforms (Facebook) and Tesla).

The chart shows the expected EPS of the Magnificant 7 and the rest of the market. The growth rates of the Magnificant 7 will decline and the momentum of the remaining companies should increase. This should bring the market breadth we are hoping for.

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