Monthly Market Risk Update: September 2023 [SlideShare]

The Independent Market Observer
Monthly Market Risk Update
September 2023
Recession Risk
• Recessions are strongly associated with market drawdowns;
8 of 10 bear markets have occurred during recessions.
• According to the National Bureau of Economic Research, the
last recession began in February 2020, at the start of the
pandemic, and ended soon thereafter.
• The economic expansion continued in August, with strong
hiring serving as a highlight. The primary risks are a deeper
slowdown in growth and tighter monetary policy from
the Fed.
Source: Institute for Supply Management, Haver Analytics
Risk
Level
Economic Shock Risk
• A major systemic risk factor is the price of money, otherwise known
as interest rates.
• Interest rates drive the economy and financial markets; historically,
they’ve also played a key role in market downturns.
• So, let’s take a closer look at the yield curve.
Source: Institute for Supply Management, Haver Analytics
Spread Between 10-Year U.S. Treasury and 3-Month U.S. Treasury
Yield Curve
(10-Year Minus
3-Month
Treasury Rates)
Source: Haver Analytics
Risk
Level
Yield Curve (10-Year Minus 3-Month Treasury Rates)
continued
• The yield curve inversion narrowed modestly in August. The
3-month yield rose from 5.55% at the end of July to 5.56% at
the end of August. The 10-year yield increased from 3.97%
to 4.09%.
• This now marks 11 consecutive months with an inverted
3-month 10-year yield curve. This doesn’t guarantee that the
economy will enter a recession, but this widely monitored
signal could indicate further slowdowns.
Risk
Level
Market Risk
• Beyond the economy, we can also learn quite a bit by examining the
market itself. For our purposes, two things are important:
1. To recognize which factors signal high risk
2. To try to determine when those factors signal that the risk
has become an immediate concern
• Here, we’ll review valuations, margin debt, technical factors, and
market complacency.
Source: Standard & Poor’s, Robert Shiller, Haver Analytics
Note: Due to data limitations, this is the same valuation data as last month’s update.
Stock Price Index: Standard & Poor’s 500 Composite
EOP, 1941-43=10
Valuations:
10-Month
Change in
Shiller P/E
Shiller Cyclically Adjusted S&P Price-to-Earnings Ratio
10-Month % Change
Risk
Level
Valuations: 10-Month Change in Shiller P/E
continued
• Looking at the 10-month change in the Shiller cyclically adjusted
price-to-earnings ratio is a good gauge of immediate risk.
• When the change drops below zero over a 10-month or
200-day period, the market typically drops shortly thereafter.
• On a 10-month basis, valuations rose 9.17% in July, breaking a
17-month streak of declining valuations.
Risk
Level
Source: Standard & Poor’s, Haver Analytics
Stock Price Index: Standard & Poor’s 500 Composite
EOP, 1941-43=10
Margin Debt
as % of
NYSE Market
Capitalization
FINRA Margin Debt as % of NYSE Market Capitalization
% Change Year-to-Year
Risk
Level
Margin Debt as % of NYSE Market Capitalization
continued
• Spikes in debt levels typically precede a market drawdown.
• Margin debt as a percentage of market capitalization
increased 0.67% on a year-over-year basis in July, which
marks the first year-over-year increase since November 2021.
Risk
Level
Source: Standard & Poor’s, Haver Analytics
Stock Price Index: Standard & Poor’s 500 Composite
EOP, 1941-43=10
Technical
Factors:
200-Day and
400-Day
Moving
Averages
S&P 10-Month (200-Day) Moving Average
S&P 20-Month (400-Day) Moving Average
Risk
Level
Technical Factors: 200-Day and 400-Day
Moving Averages continued
• We start to pay attention when a market breaks through its
200-day average; a breakthrough of the 400-day average
often signals further trouble ahead.
• The S&P 500, Dow Jones Industrial Average (DJIA), and
Nasdaq Composite all finished above their respective 200-day
moving averages in August.
• This is the eighth consecutive month that all three indices
experienced technical support. Risk
Level
S&P 500 Forward P/E Divided by VIX
Market
Complacency:
S&P 500
Forward P/E
Divided by
VIX
Source: Haver Analytics, FactSet
Risk
Level
Market Complacency: S&P 500 Forward P/E
Divided by VIX continued
• Often, high valuations (forward P/E) signal investors are confident
and potentially complacent. When volatility (VIX) is high, there is
less complacency.
• Periods of high valuations and low volatility cause peaks in the
index (e.g., 2000, 2006–2007, and 2017); market drawdowns
occurred roughly one year after those peaks.
• Market complacency fell in August. The VIX increased from 13.94
in July to 15.85 in August, while the forward-looking P/E ratio
dropped from 19.2 to 18.6.
Source: Institute for Supply Management, Haver Analytics
Risk
Level
Conclusion: Market Risks Remain
• Signs of a potential slowdown in economic growth in August
spooked investors and contributed to the declines.
• The modest sell-off in August was a reminder that real risks
remain for investors despite the positive returns we’ve seen
this year.
• Ultimately, the path back to normal will likely be long, with
setbacks along the way.
Source: Institute for Supply Management, Haver Analytics
Risk
Level
Certain sections of this commentary contain forward-
looking statements that are based on our reasonable
expectations, estimates, projections, and assumptions.
Forward-looking statements are not guarantees of future
performance and involve certain risks and uncertainties,
which are difficult to predict. Past performance is not
indicative of future results.
Diversification does not assure a profit or protect against
loss in declining markets. All indices are unmanaged, and
investors cannot invest directly in an index.
The information contained herein is provided for
informational purposes only and is based upon sources
believed to be reliable. No guarantee is made as to the
completeness or accuracy of the information.
Disclosure
1 de 16

Recomendados

Monthly Market Risk Update: August 2023 [SlideShare] por
Monthly Market Risk Update: August 2023 [SlideShare]Monthly Market Risk Update: August 2023 [SlideShare]
Monthly Market Risk Update: August 2023 [SlideShare]Commonwealth
594 visualizações16 slides
Monthly Market Risk Update: October 2023 [SlideShare] por
Monthly Market Risk Update: October 2023 [SlideShare]Monthly Market Risk Update: October 2023 [SlideShare]
Monthly Market Risk Update: October 2023 [SlideShare]Commonwealth
553 visualizações16 slides
Monthly Market Risk Update: July 2023 [SlideShare] por
Monthly Market Risk Update: July 2023 [SlideShare]Monthly Market Risk Update: July 2023 [SlideShare]
Monthly Market Risk Update: July 2023 [SlideShare]Commonwealth
639 visualizações16 slides
Monthly Market Risk Update: November 2023 [SlideShare] por
Monthly Market Risk Update: November 2023 [SlideShare]Monthly Market Risk Update: November 2023 [SlideShare]
Monthly Market Risk Update: November 2023 [SlideShare]Commonwealth
388 visualizações16 slides
Monthly Market Risk Update: April 2023 [SlideShare] por
Monthly Market Risk Update: April 2023 [SlideShare]Monthly Market Risk Update: April 2023 [SlideShare]
Monthly Market Risk Update: April 2023 [SlideShare]Commonwealth
722 visualizações16 slides
Monthly Market Risk Update: October 2022 [SlideShare] por
Monthly Market Risk Update: October 2022 [SlideShare]Monthly Market Risk Update: October 2022 [SlideShare]
Monthly Market Risk Update: October 2022 [SlideShare]Commonwealth
676 visualizações16 slides

Mais conteúdo relacionado

Similar a Monthly Market Risk Update: September 2023 [SlideShare]

Monthly Market Risk Update: June 2023 [SlideShare] por
Monthly Market Risk Update: June 2023 [SlideShare]Monthly Market Risk Update: June 2023 [SlideShare]
Monthly Market Risk Update: June 2023 [SlideShare]Commonwealth
712 visualizações16 slides
Monthly Market Risk Update: February 2023 [SlideShare] por
Monthly Market Risk Update: February 2023 [SlideShare]Monthly Market Risk Update: February 2023 [SlideShare]
Monthly Market Risk Update: February 2023 [SlideShare]Commonwealth
829 visualizações16 slides
Monthly Market Risk Update: May 2023 [SlideShare] por
Monthly Market Risk Update: May 2023 [SlideShare]Monthly Market Risk Update: May 2023 [SlideShare]
Monthly Market Risk Update: May 2023 [SlideShare]Commonwealth
753 visualizações16 slides
Monthly Market Risk Update: January 2023 [SlideShare] por
Monthly Market Risk Update: January 2023 [SlideShare]Monthly Market Risk Update: January 2023 [SlideShare]
Monthly Market Risk Update: January 2023 [SlideShare]Commonwealth
750 visualizações16 slides
Monthly Market Risk Update: September 2022 [SlideShare] por
Monthly Market Risk Update: September 2022 [SlideShare]Monthly Market Risk Update: September 2022 [SlideShare]
Monthly Market Risk Update: September 2022 [SlideShare]Commonwealth
706 visualizações16 slides
Monthly Market Risk Update: March 2023 [SlideShare] por
Monthly Market Risk Update: March 2023 [SlideShare]Monthly Market Risk Update: March 2023 [SlideShare]
Monthly Market Risk Update: March 2023 [SlideShare]Commonwealth
724 visualizações16 slides

Similar a Monthly Market Risk Update: September 2023 [SlideShare](20)

Monthly Market Risk Update: June 2023 [SlideShare] por Commonwealth
Monthly Market Risk Update: June 2023 [SlideShare]Monthly Market Risk Update: June 2023 [SlideShare]
Monthly Market Risk Update: June 2023 [SlideShare]
Commonwealth 712 visualizações
Monthly Market Risk Update: February 2023 [SlideShare] por Commonwealth
Monthly Market Risk Update: February 2023 [SlideShare]Monthly Market Risk Update: February 2023 [SlideShare]
Monthly Market Risk Update: February 2023 [SlideShare]
Commonwealth 829 visualizações
Monthly Market Risk Update: May 2023 [SlideShare] por Commonwealth
Monthly Market Risk Update: May 2023 [SlideShare]Monthly Market Risk Update: May 2023 [SlideShare]
Monthly Market Risk Update: May 2023 [SlideShare]
Commonwealth 753 visualizações
Monthly Market Risk Update: January 2023 [SlideShare] por Commonwealth
Monthly Market Risk Update: January 2023 [SlideShare]Monthly Market Risk Update: January 2023 [SlideShare]
Monthly Market Risk Update: January 2023 [SlideShare]
Commonwealth 750 visualizações
Monthly Market Risk Update: September 2022 [SlideShare] por Commonwealth
Monthly Market Risk Update: September 2022 [SlideShare]Monthly Market Risk Update: September 2022 [SlideShare]
Monthly Market Risk Update: September 2022 [SlideShare]
Commonwealth 706 visualizações
Monthly Market Risk Update: March 2023 [SlideShare] por Commonwealth
Monthly Market Risk Update: March 2023 [SlideShare]Monthly Market Risk Update: March 2023 [SlideShare]
Monthly Market Risk Update: March 2023 [SlideShare]
Commonwealth 724 visualizações
Linear note 4 securities por Dr Marcus Bent
Linear note 4  securitiesLinear note 4  securities
Linear note 4 securities
Dr Marcus Bent313 visualizações
Laurentian Bank Securities - Economic Research and Strategy por Mark MacIsaac
Laurentian Bank Securities - Economic Research and Strategy Laurentian Bank Securities - Economic Research and Strategy
Laurentian Bank Securities - Economic Research and Strategy
Mark MacIsaac101 visualizações
LBS - Asset Allocation Model – February Update por Mark MacIsaac
LBS - Asset Allocation Model – February UpdateLBS - Asset Allocation Model – February Update
LBS - Asset Allocation Model – February Update
Mark MacIsaac48 visualizações
LBS Asset Allocation August Update - July 28, 2017 por Mark MacIsaac
LBS Asset Allocation August Update - July 28, 2017LBS Asset Allocation August Update - July 28, 2017
LBS Asset Allocation August Update - July 28, 2017
Mark MacIsaac70 visualizações
U_S_PORTFOLIO_STRATEGY_W_102803589 por Barry Knapp
U_S_PORTFOLIO_STRATEGY_W_102803589U_S_PORTFOLIO_STRATEGY_W_102803589
U_S_PORTFOLIO_STRATEGY_W_102803589
Barry Knapp332 visualizações
Market Volatility por dkeogh
Market VolatilityMarket Volatility
Market Volatility
dkeogh551 visualizações
Weekly Market Notes for January 7, 2019 por Sarah Cuddy
Weekly Market Notes for January 7, 2019Weekly Market Notes for January 7, 2019
Weekly Market Notes for January 7, 2019
Sarah Cuddy10 visualizações
Weekly Market Notes for July 24, 2017 por Sarah Cuddy
Weekly Market Notes for July 24, 2017Weekly Market Notes for July 24, 2017
Weekly Market Notes for July 24, 2017
Sarah Cuddy26 visualizações
Fritzmeyersamplepresentation 110217102619-phpapp01 por Rod Tyler
Fritzmeyersamplepresentation 110217102619-phpapp01Fritzmeyersamplepresentation 110217102619-phpapp01
Fritzmeyersamplepresentation 110217102619-phpapp01
Rod Tyler110 visualizações
Fritz Meyer Sample Presentation por Advisors4Advisors
Fritz Meyer Sample PresentationFritz Meyer Sample Presentation
Fritz Meyer Sample Presentation
Advisors4Advisors6.1K visualizações
SPDR Financial Services ETF - Final New por Mark Fanagan
SPDR Financial Services ETF - Final NewSPDR Financial Services ETF - Final New
SPDR Financial Services ETF - Final New
Mark Fanagan220 visualizações
marketview-_7-12 por Frank Corbett
marketview-_7-12marketview-_7-12
marketview-_7-12
Frank Corbett143 visualizações
LBS - Asset Allocation - May Update - May 1, 2017 por Mark MacIsaac
LBS - Asset Allocation - May Update - May 1, 2017LBS - Asset Allocation - May Update - May 1, 2017
LBS - Asset Allocation - May Update - May 1, 2017
Mark MacIsaac42 visualizações

Mais de Commonwealth

Economic Risk Factor Update: November 2023 [SlideShare] por
Economic Risk Factor Update: November 2023 [SlideShare]Economic Risk Factor Update: November 2023 [SlideShare]
Economic Risk Factor Update: November 2023 [SlideShare]Commonwealth
411 visualizações11 slides
Economic Risk Factor Update: October 2023 [SlideShare] por
Economic Risk Factor Update: October 2023 [SlideShare]Economic Risk Factor Update: October 2023 [SlideShare]
Economic Risk Factor Update: October 2023 [SlideShare]Commonwealth
406 visualizações11 slides
Economic Risk Factor Update: September 2023 [SlideShare] por
Economic Risk Factor Update: September 2023 [SlideShare]Economic Risk Factor Update: September 2023 [SlideShare]
Economic Risk Factor Update: September 2023 [SlideShare]Commonwealth
530 visualizações11 slides
Economic Risk Factor Update: August 2023 [SlideShare] por
Economic Risk Factor Update: August 2023 [SlideShare]Economic Risk Factor Update: August 2023 [SlideShare]
Economic Risk Factor Update: August 2023 [SlideShare]Commonwealth
813 visualizações11 slides
Economic Risk Factor Update: July 2023 [SlideShare] por
Economic Risk Factor Update: July 2023 [SlideShare]Economic Risk Factor Update: July 2023 [SlideShare]
Economic Risk Factor Update: July 2023 [SlideShare]Commonwealth
604 visualizações11 slides
Economic Risk Factor Update: June 2023 [SlideShare] por
Economic Risk Factor Update: June 2023 [SlideShare]Economic Risk Factor Update: June 2023 [SlideShare]
Economic Risk Factor Update: June 2023 [SlideShare]Commonwealth
790 visualizações11 slides

Mais de Commonwealth (17)

Economic Risk Factor Update: November 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: November 2023 [SlideShare]Economic Risk Factor Update: November 2023 [SlideShare]
Economic Risk Factor Update: November 2023 [SlideShare]
Commonwealth 411 visualizações
Economic Risk Factor Update: October 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: October 2023 [SlideShare]Economic Risk Factor Update: October 2023 [SlideShare]
Economic Risk Factor Update: October 2023 [SlideShare]
Commonwealth 406 visualizações
Economic Risk Factor Update: September 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: September 2023 [SlideShare]Economic Risk Factor Update: September 2023 [SlideShare]
Economic Risk Factor Update: September 2023 [SlideShare]
Commonwealth 530 visualizações
Economic Risk Factor Update: August 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: August 2023 [SlideShare]Economic Risk Factor Update: August 2023 [SlideShare]
Economic Risk Factor Update: August 2023 [SlideShare]
Commonwealth 813 visualizações
Economic Risk Factor Update: July 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: July 2023 [SlideShare]Economic Risk Factor Update: July 2023 [SlideShare]
Economic Risk Factor Update: July 2023 [SlideShare]
Commonwealth 604 visualizações
Economic Risk Factor Update: June 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: June 2023 [SlideShare]Economic Risk Factor Update: June 2023 [SlideShare]
Economic Risk Factor Update: June 2023 [SlideShare]
Commonwealth 790 visualizações
Avoid Common Charitable Planning Mistakes: A Guide for Advisors por Commonwealth
Avoid Common Charitable Planning Mistakes: A Guide for AdvisorsAvoid Common Charitable Planning Mistakes: A Guide for Advisors
Avoid Common Charitable Planning Mistakes: A Guide for Advisors
Commonwealth 1.2M visualizações
Economic Risk Factor Update: May 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: May 2023 [SlideShare]Economic Risk Factor Update: May 2023 [SlideShare]
Economic Risk Factor Update: May 2023 [SlideShare]
Commonwealth 814 visualizações
Economic Risk Factor Update: April 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: April 2023 [SlideShare]Economic Risk Factor Update: April 2023 [SlideShare]
Economic Risk Factor Update: April 2023 [SlideShare]
Commonwealth 732 visualizações
Economic Risk Factor Update: March 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: March 2023 [SlideShare]Economic Risk Factor Update: March 2023 [SlideShare]
Economic Risk Factor Update: March 2023 [SlideShare]
Commonwealth 1.1K visualizações
Economic Risk Factor Update: February 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: February 2023 [SlideShare]Economic Risk Factor Update: February 2023 [SlideShare]
Economic Risk Factor Update: February 2023 [SlideShare]
Commonwealth 868 visualizações
Economic Risk Factor Update: January 2023 [SlideShare] por Commonwealth
Economic Risk Factor Update: January 2023 [SlideShare]Economic Risk Factor Update: January 2023 [SlideShare]
Economic Risk Factor Update: January 2023 [SlideShare]
Commonwealth 973 visualizações
Economic Risk Factor Update: December 2022 [SlideShare] por Commonwealth
Economic Risk Factor Update: December 2022 [SlideShare]Economic Risk Factor Update: December 2022 [SlideShare]
Economic Risk Factor Update: December 2022 [SlideShare]
Commonwealth 720 visualizações
Finding the Good Through Learning and Community por Commonwealth
Finding the Good Through Learning and CommunityFinding the Good Through Learning and Community
Finding the Good Through Learning and Community
Commonwealth 1.3K visualizações
Economic Risk Factor Update: November 2022 [SlideShare] por Commonwealth
Economic Risk Factor Update: November 2022 [SlideShare]Economic Risk Factor Update: November 2022 [SlideShare]
Economic Risk Factor Update: November 2022 [SlideShare]
Commonwealth 844 visualizações
Flexible, integrated technology? We’ve got that. por Commonwealth
Flexible, integrated technology? We’ve got that.Flexible, integrated technology? We’ve got that.
Flexible, integrated technology? We’ve got that.
Commonwealth 1.2K visualizações
Are you ready to elevate the client experience? por Commonwealth
Are you ready to elevate the client experience?Are you ready to elevate the client experience?
Are you ready to elevate the client experience?
Commonwealth 432 visualizações

Último

1_updated_Axis India Manufacturing Fund-NFO One pager.pdf por
1_updated_Axis India Manufacturing Fund-NFO One pager.pdf1_updated_Axis India Manufacturing Fund-NFO One pager.pdf
1_updated_Axis India Manufacturing Fund-NFO One pager.pdfmultigainfinancial
38 visualizações3 slides
InitVerse :Blockchain technology trends in 2024.pdf por
InitVerse :Blockchain technology trends in 2024.pdfInitVerse :Blockchain technology trends in 2024.pdf
InitVerse :Blockchain technology trends in 2024.pdfInitVerse Blockchain
23 visualizações9 slides
InitVerse :Blockchain development trends in 2024.pdf por
InitVerse :Blockchain development trends in 2024.pdfInitVerse :Blockchain development trends in 2024.pdf
InitVerse :Blockchain development trends in 2024.pdfInitVerse Blockchain
23 visualizações9 slides
Rob Tolley London - Financial Strategy por
Rob Tolley London - Financial StrategyRob Tolley London - Financial Strategy
Rob Tolley London - Financial StrategyRob Tolley
6 visualizações4 slides
List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa... por
List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa...List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa...
List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa...aljazeeramasoom
7 visualizações26 slides
The breath of the investment grade and the unpredictability of inflation - Eu... por
The breath of the investment grade and the unpredictability of inflation - Eu...The breath of the investment grade and the unpredictability of inflation - Eu...
The breath of the investment grade and the unpredictability of inflation - Eu...Antonis Zairis
12 visualizações1 slide

Último(20)

1_updated_Axis India Manufacturing Fund-NFO One pager.pdf por multigainfinancial
1_updated_Axis India Manufacturing Fund-NFO One pager.pdf1_updated_Axis India Manufacturing Fund-NFO One pager.pdf
1_updated_Axis India Manufacturing Fund-NFO One pager.pdf
multigainfinancial38 visualizações
InitVerse :Blockchain technology trends in 2024.pdf por InitVerse Blockchain
InitVerse :Blockchain technology trends in 2024.pdfInitVerse :Blockchain technology trends in 2024.pdf
InitVerse :Blockchain technology trends in 2024.pdf
InitVerse Blockchain23 visualizações
InitVerse :Blockchain development trends in 2024.pdf por InitVerse Blockchain
InitVerse :Blockchain development trends in 2024.pdfInitVerse :Blockchain development trends in 2024.pdf
InitVerse :Blockchain development trends in 2024.pdf
InitVerse Blockchain23 visualizações
Rob Tolley London - Financial Strategy por Rob Tolley
Rob Tolley London - Financial StrategyRob Tolley London - Financial Strategy
Rob Tolley London - Financial Strategy
Rob Tolley6 visualizações
List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa... por aljazeeramasoom
List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa...List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa...
List of Qataris Sanctioned by the U.S. Treasury Department for Links to Al-Qa...
aljazeeramasoom7 visualizações
The breath of the investment grade and the unpredictability of inflation - Eu... por Antonis Zairis
The breath of the investment grade and the unpredictability of inflation - Eu...The breath of the investment grade and the unpredictability of inflation - Eu...
The breath of the investment grade and the unpredictability of inflation - Eu...
Antonis Zairis12 visualizações
Digital4Climate-Leveraging Digital innovations & data for climate action por Soren Gigler
Digital4Climate-Leveraging Digital innovations & data for climate action Digital4Climate-Leveraging Digital innovations & data for climate action
Digital4Climate-Leveraging Digital innovations & data for climate action
Soren Gigler67 visualizações
Supplier Sourcing presentation.pdf por AllenSingson
Supplier Sourcing presentation.pdfSupplier Sourcing presentation.pdf
Supplier Sourcing presentation.pdf
AllenSingson20 visualizações
Topic 37 copy.pptx por saleh176
Topic 37 copy.pptxTopic 37 copy.pptx
Topic 37 copy.pptx
saleh1765 visualizações
QNBFS Daily Market Report November 29, 2023 por QNB Group
QNBFS Daily Market Report November 29, 2023QNBFS Daily Market Report November 29, 2023
QNBFS Daily Market Report November 29, 2023
QNB Group10 visualizações
Pandit No2 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam... por Amil baba
Pandit No2 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam...Pandit No2 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam...
Pandit No2 Black Magic Specialist In Lahore Black magic In Pakistan Kala Ilam...
Amil baba7 visualizações
Housing Discrimination in America.pptx por ecobbins1
Housing Discrimination in America.pptxHousing Discrimination in America.pptx
Housing Discrimination in America.pptx
ecobbins125 visualizações
Embracing the eFarming Challenge.pdf por ramadhan04116
Embracing the eFarming Challenge.pdfEmbracing the eFarming Challenge.pdf
Embracing the eFarming Challenge.pdf
ramadhan041169 visualizações
Stabilizing Algorithmic Stablecoins: the TerraLuna case study por FedericoCalandra1
Stabilizing Algorithmic Stablecoins: the TerraLuna case studyStabilizing Algorithmic Stablecoins: the TerraLuna case study
Stabilizing Algorithmic Stablecoins: the TerraLuna case study
FedericoCalandra16 visualizações
Debt Watch | ICICI Prudential Mutual Fund por iciciprumf
Debt Watch | ICICI Prudential Mutual FundDebt Watch | ICICI Prudential Mutual Fund
Debt Watch | ICICI Prudential Mutual Fund
iciciprumf20 visualizações
Debt Watch | ICICI Prudential Mutual Fund por iciciprumf
Debt Watch | ICICI Prudential Mutual FundDebt Watch | ICICI Prudential Mutual Fund
Debt Watch | ICICI Prudential Mutual Fund
iciciprumf8 visualizações
MNI Connect por Latvijas Banka
MNI Connect MNI Connect
MNI Connect
Latvijas Banka16 visualizações
Amalgamation, Absorption, External Reconstruction and Internal Reconstruction... por Dr.G. KARTHIKEYAN
Amalgamation, Absorption, External Reconstruction and Internal Reconstruction...Amalgamation, Absorption, External Reconstruction and Internal Reconstruction...
Amalgamation, Absorption, External Reconstruction and Internal Reconstruction...
Dr.G. KARTHIKEYAN19 visualizações
Motilal Oswal Small Cap Fund One Pager.pdf por multigainfinancial
Motilal Oswal Small Cap Fund One Pager.pdfMotilal Oswal Small Cap Fund One Pager.pdf
Motilal Oswal Small Cap Fund One Pager.pdf
multigainfinancial290 visualizações

Monthly Market Risk Update: September 2023 [SlideShare]

  • 1. The Independent Market Observer Monthly Market Risk Update September 2023
  • 2. Recession Risk • Recessions are strongly associated with market drawdowns; 8 of 10 bear markets have occurred during recessions. • According to the National Bureau of Economic Research, the last recession began in February 2020, at the start of the pandemic, and ended soon thereafter. • The economic expansion continued in August, with strong hiring serving as a highlight. The primary risks are a deeper slowdown in growth and tighter monetary policy from the Fed. Source: Institute for Supply Management, Haver Analytics Risk Level
  • 3. Economic Shock Risk • A major systemic risk factor is the price of money, otherwise known as interest rates. • Interest rates drive the economy and financial markets; historically, they’ve also played a key role in market downturns. • So, let’s take a closer look at the yield curve. Source: Institute for Supply Management, Haver Analytics
  • 4. Spread Between 10-Year U.S. Treasury and 3-Month U.S. Treasury Yield Curve (10-Year Minus 3-Month Treasury Rates) Source: Haver Analytics Risk Level
  • 5. Yield Curve (10-Year Minus 3-Month Treasury Rates) continued • The yield curve inversion narrowed modestly in August. The 3-month yield rose from 5.55% at the end of July to 5.56% at the end of August. The 10-year yield increased from 3.97% to 4.09%. • This now marks 11 consecutive months with an inverted 3-month 10-year yield curve. This doesn’t guarantee that the economy will enter a recession, but this widely monitored signal could indicate further slowdowns. Risk Level
  • 6. Market Risk • Beyond the economy, we can also learn quite a bit by examining the market itself. For our purposes, two things are important: 1. To recognize which factors signal high risk 2. To try to determine when those factors signal that the risk has become an immediate concern • Here, we’ll review valuations, margin debt, technical factors, and market complacency.
  • 7. Source: Standard & Poor’s, Robert Shiller, Haver Analytics Note: Due to data limitations, this is the same valuation data as last month’s update. Stock Price Index: Standard & Poor’s 500 Composite EOP, 1941-43=10 Valuations: 10-Month Change in Shiller P/E Shiller Cyclically Adjusted S&P Price-to-Earnings Ratio 10-Month % Change Risk Level
  • 8. Valuations: 10-Month Change in Shiller P/E continued • Looking at the 10-month change in the Shiller cyclically adjusted price-to-earnings ratio is a good gauge of immediate risk. • When the change drops below zero over a 10-month or 200-day period, the market typically drops shortly thereafter. • On a 10-month basis, valuations rose 9.17% in July, breaking a 17-month streak of declining valuations. Risk Level
  • 9. Source: Standard & Poor’s, Haver Analytics Stock Price Index: Standard & Poor’s 500 Composite EOP, 1941-43=10 Margin Debt as % of NYSE Market Capitalization FINRA Margin Debt as % of NYSE Market Capitalization % Change Year-to-Year Risk Level
  • 10. Margin Debt as % of NYSE Market Capitalization continued • Spikes in debt levels typically precede a market drawdown. • Margin debt as a percentage of market capitalization increased 0.67% on a year-over-year basis in July, which marks the first year-over-year increase since November 2021. Risk Level
  • 11. Source: Standard & Poor’s, Haver Analytics Stock Price Index: Standard & Poor’s 500 Composite EOP, 1941-43=10 Technical Factors: 200-Day and 400-Day Moving Averages S&P 10-Month (200-Day) Moving Average S&P 20-Month (400-Day) Moving Average Risk Level
  • 12. Technical Factors: 200-Day and 400-Day Moving Averages continued • We start to pay attention when a market breaks through its 200-day average; a breakthrough of the 400-day average often signals further trouble ahead. • The S&P 500, Dow Jones Industrial Average (DJIA), and Nasdaq Composite all finished above their respective 200-day moving averages in August. • This is the eighth consecutive month that all three indices experienced technical support. Risk Level
  • 13. S&P 500 Forward P/E Divided by VIX Market Complacency: S&P 500 Forward P/E Divided by VIX Source: Haver Analytics, FactSet Risk Level
  • 14. Market Complacency: S&P 500 Forward P/E Divided by VIX continued • Often, high valuations (forward P/E) signal investors are confident and potentially complacent. When volatility (VIX) is high, there is less complacency. • Periods of high valuations and low volatility cause peaks in the index (e.g., 2000, 2006–2007, and 2017); market drawdowns occurred roughly one year after those peaks. • Market complacency fell in August. The VIX increased from 13.94 in July to 15.85 in August, while the forward-looking P/E ratio dropped from 19.2 to 18.6. Source: Institute for Supply Management, Haver Analytics Risk Level
  • 15. Conclusion: Market Risks Remain • Signs of a potential slowdown in economic growth in August spooked investors and contributed to the declines. • The modest sell-off in August was a reminder that real risks remain for investors despite the positive returns we’ve seen this year. • Ultimately, the path back to normal will likely be long, with setbacks along the way. Source: Institute for Supply Management, Haver Analytics Risk Level
  • 16. Certain sections of this commentary contain forward- looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged, and investors cannot invest directly in an index. The information contained herein is provided for informational purposes only and is based upon sources believed to be reliable. No guarantee is made as to the completeness or accuracy of the information. Disclosure