first of all, welcome to the +800 new readers for a total of 8,000! The independent investment research here is now read across 145 countries and 50 US states! Enjoy!

Second of all, Happy International Labour Day! A moment to recognize & appreciate the hard work, consistency and achievements of all men and women across the globe!

"All labour that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence." — Martin Luther King Jr. —

"A hundred times every day I remind myself that my inner and outer life depend on the labours of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving." — Albert Einstein —

"Without labour nothing prospers." — Sophocles —

From my side:

• wishing you a well-deserved break and relaxation on Labour Day, as you recharge and prepare for your new ventures and projects ahead!

• also a moment of kudos to you given that you likely save money, which = you pay yourself first, and invest which = the leverage that makes compounding work!

And now welcome to the ✍️ The S&P 500 Report: Valuation, Earnings & Fundamentals + Special & Alternative Metrics, a unique report via data driven research and visually appealing charts that simply tell 10,000 words!

A quarterly report given it’s comprehensive nature & fits well with both Bottom-Up & Top-Down approaches. Delivers a great overview via many angles for many use cases. If you know a better and comprehensive S&P 500 coverage (free or paid), let me know!

N.B. in case you missed the sister report with complementary coverage, there you go:

✍️ The S&P 500 Report: Performance, Profitability, Sentiment & More

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

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A perfect time for another S&P 500 deep dive as we are into the deep part of the Q1 2024 earnings. Structured in 4 parts + bonus charts & designed to have a natural flow:

📊 S&P 500 Index Overall Valuation: P/E, FCF yield, P/S and sleek scatterplots

📊 Earnings & Fundamentals: actual earnings & expectations, fundamentals & more

📊 The 11 Sectors Valuation Breakdown: relative valuation, Mag 7 and scatterplots

📊 Special & Alternative Metrics: food for thought via sleek and intriguing charts

👍 Bonus Charts 👍

📊 S&P 500 Index Overall Valuation: P/E, FCF yield, P/S and sleek scatterplots

👉 Forward PE ratio (blue) = 20.7x

Buy it Low Sell it High fundamental metric, complementary context and insights:

Compared to historical averages, we are trading above via the current bull market:

• 20-year (grey) = 16.4x, 10-year = 18.6x, 5-year = 20.0x, 3-year = 19.6x

Relative to standard deviations +/- 1, +/- 2, check when we trade at extreme values:

• we are above the +1 SD (orange) 19.3x, yet below the +2 SD (red) 22.2x that says overvaluation: the 2020-2021 excess shows that quite clearly = sell signals

• -1 SD (light green) 13.5x which signalled the 2020 Covid bottom, while the crazy -2 SD (dark green) 10.6x which happened in 2008 and 2012 = strong buy signals

During recessions via the red bars:

• the cheapest/bottom P/E happens while we are still in a recession, hence that is the time to buy! Yet, so many sell at the bottoms, mark losses via fear, no plan ...

• once out of a recession, the P/E is already at the 20-year average at a minimum (like in 2010 after Lehman), if not +1 or +2 SD as in the 2020 Covid strong rebound

Maverick take-aways - this P/E view is simple yet important and a strong gauge:

• the signal is very strong when we have a stock market correction: at -1 SD and even more at -2 SD I would be a buyer!

• while when we have euphoria, especially when we got close or even above the +2 SD, it is a strong signal of overvaluation

👉 Free Cash Flow Yield (blue) = 3.05%

Buy it High Sell it Low kind of fundamental metric (hence also the change of colors), complementary context & insights, and I also added the drawdowns at the bottom (red)

Relative to standard deviations +/- 1, +/- 2, check when we trade at extreme values:

• we are below the -1 SD (orange) 3.36%, and also not far from the +2 SD (red) 2.93% which would indicate a strong overvaluation, hence call for caution

• note how when we touched the +1 SD (light green) in 2022 it was a good sign of cheapness, while the +2 SD (dark green) during the 2020 Covid panic was a great time to buy (similar during the 2018 stock market drawdown)

Maverick take-aways - this FCF yield view is simple yet important and a strong gauge:

• the signal is very strong when we have a stock market correction: at +1 SD and even more at +2 SD I would be a buyer!

• while when we have euphoria, especially when we got close to the -2 SD it is a strong signal of overvaluation

Free Cash Flow Yield over Market Cap (above over Enterprise Value EV) = 3.75%

• similar ways to look at it and interpret for likely current over or undervaluation

N.B. I prefer the FCF yield with over EV metric vs market cap alone, with EV debt is counted in and cash is subtracted (S&P 500 is quite cash rich), both good in any case

Zooming out via the Free Cash Flow Yield from 1995-2024:

• 2002 Dotcom fallout: shot above 6% when the S&P 500 reached its 49% maximum drawdown

• Lehman collapses in September 2008, while Buffett shortly after in October says 'Buy American. I Am.' in a New York Times op-ed as the FCF yield was above 10% … let that sink in .. and bring the sink if you wish …

• 2009 FCF yield shot up to a bonkers +13% when the S&P 500 reached its 56% maximum drawdown … now those were quite some crazy times …

• 2020 Covid: shot above 6% when the S&P 500 reached its 34% maximum drawdown

P.S. I was down 52% in 2009, best lesson ever in owning businesses not ticker symbols: everything else after the 2007-2009 GFC felt like 'peanuts' via a direct comparison …

Free Cash Flow yield: Buy it High Sell it Low gauges aka rules of thumb:

• at 6% it is already good to be a buyer …

• at +10% it is like 1 or 2 times in a generation ...

Complementary, my twitter post from 2023 on the FCF yield + context:

👉 P/S ratio (white) currently = 2.73x

• below the 2020-2021 mania highs

• whenever this goes to below 2x, I would get very tempted to buy … let alone if it ever goes below 1x like in the 2007-2009 GFC, temptation senses would be all over

N.B the correlation with bank reserves (blue), we can say that liquidity matters …

👉 S&P 500 comprehensive statistical valuation metrics via Bank of America:

• except the ERP - Equity Risk Premium (market based), relative to historical average values, the S&P 500 is expensive statistically speaking

• a general simple note, given that lately we are hovering around all-time highs, that is to be expected … and the more the economy evolves and the S&P 500 performs, the statistical relationship will keep holding …

• hence, this is rather a complementary way to connect one’s dots …

👉 Now that we looked at the index level, let’s get granular & dive deeper inside the index via the single stocks that shape the S&P 500 index.

How = via sleek ‘2D’ scatterplots

Mission = chasing outliers, positive/negative momentum, over/under valuation:

1. P/S multiple with Revenue growth (next year estimates) for a ‘Top-line’ view. Interpretation: forward P/S multiple the stock is trading for the given estimated Sales growth - a rule of thumb: one aims to pay a low multiple for high growth

• Nvidia (NVDA) and Super Micro Computer (SMCI) quite some outliers …

Complementary here: the percentile of each stock’s forward P/S ratio vs their 10-year history coupled with the total return in the last 3 years (quite a Maverick-esque visual which you do not see around)

• Micro Computer (SMCI) was excluded as it was distorting the chart big time: a +2,200% 3-year return, and naturally at a 99th percentile P/S - let that sink in!

• quite some names trading at their +90th percentile P/S

• use case: spotting names that did return well, yet not at a very high P/E 10-year percentile is one way to look - check your top names and connect the dots …

2. P/E multiple with Earnings/EPS growth (next year estimates), a ‘Bottom-line’ view.

   Interpretation: Forward P/E multiple the stock is trading for the given estimated Earnings growth - a rule of thumb: one aims to pay a low multiple for high growth

• Illumina (ILMN) looking very expensive via this single view …

Complementary here: the percentile of each stock’s forward P/E ratio vs their 10-year history coupled with the total return in the last 3 years (quite a Maverick-esque visual which you do not see around)

• use case: spotting names that did return well, yet not at a very high P/E 10-year percentile is one way to look - check your top names and connect the dots …

• Micro Computer (SMCI) was excluded as it was distorting the chart big time: a +2,200% 3-year return, and naturally at a 99th percentile P/E - let that sink in!

• Nvidia (NVDA) off the chart almost …

3. P/FCF multiple with FCF/Share (last twelve months) for a ‘Cash Flow’ view.

   Interpretation: P/FCF multiple the stock is trading at for the given level of FCF/Share - a rule of thumb: one aims to pay a low multiple for high FCF/share

• Tesla (TSLA) a big outlier via this single view …

• Check also Lockheed Martin (LMT) …

Complementary here: the percentile of each stock’s P/FCF ratio vs their 10-year history coupled with the total return in the last 3 years (quite a Maverick-esque visual which you do not see often around).

• use case: spotting names that did return well, yet not at a very high P/FCF 10-year percentile is one way to look - check your top names and connect the dots …

• quite some outliers here both on the negative and positive side

• Nvidia (NVDA) off the chart almost …

Maverick take on the current S&P 500 valuation overall:

• we are not not overvalued nor undervalued, about fairly valued … if I would have to choose binary from the two, the small tilt would go towards overvaluation now

• key reminder: the market is structurally net long, hard to stop the moving train if you believe humanity and societies will evolve!

• the latter is one key reason why I believe it is way easier to spot fear and bottoms, than greed and tops! Moreover, tops are rather like a process, whereas bottoms are rather events or a series of events and the metrics to spot it are more telling in these cases (e.g. the above P/E, FCF Yield interpretations to spot a bottom)

• just need a cool head and income/cash during the tough periods to ride them out, and further more take the opportunity to buy great businesses cheaper!

📊 Earnings & Fundamentals: actual earnings & expectations, fundamentals & more

👉 Q1 2024 actual earnings scorecard:

• revenue growth +4.5% (not bad at all ...)

• earnings growth +3.9% (not bad at all either ...)

Earnings expectations:

👉 overall 2024 earnings expectations are high with a 8% growth after < 1% in 2023

The long term trend of the Trailing 12-month EPS (earnings per share):

• being close or even above the upper limit of the long-term trend indicated many times overstretching, hence expected mean reversion (see 2000 / 2007 recessions)

• the same when we fall below the lower limit of the trend, it’s cheap & buy time …

We are not in any of the extreme bounds now, so it looks decent while the earnings season is young and evolving …

👉 ‘The Maturity Wall’ = the idea of the corporate interest expense and the risks that debt burdens will start to hit big time = quite a fear-mongering recurring theme since the US FED started in 2022 rising interest rates at the fastest pace in 4 decades.

👉 Current values for US yields, and like before, above even the 2007-2009 period

Chart - U.S. yields 3m, 6m, 1y 2y 3y 5y 10y 30y with a 20-year lookback period:

Nonetheless, how about ‘The NON-Maturity Wall’?

👉 most S&P 500 companies have negotiated fixed rates ... and less than 10% will need to be refinanced in 2024 ...

👉 despite all the rate hikes of 2022 and 2023, the interest rates paid by the biggest US concerns are PEANUTS, barely off the bottom and around all-time record lows

👉 With the interest rates hiking cycle pretty much done and hovering around the top, it’s effect is NOT transmitted to the balance sheet of the S&P 500 companies. Not only many took debt with fixed rates, but also the overall debt levels are LOW!

Talking is easy & cheap, doing with data, chars and insights is expensive. Hence, let’s check the (safe) balance sheet of the S&P 500 companies:

• Net Debt / EBITDA at one of the lowest points historically … let that sink in!

• Total Debt to Equity guess what? Sends the same safe balance sheets message

• Total Debt to Total Assets - same …

• Last but not least, Total Debt to EV (Enterprise Value) with the same message

📊 The 11 Sectors Valuation Breakdown: relative valuation, Mag 7 and scatterplots

👉 Relative valuation - the 11 sectors VS the S&P 500 overall: via Price/Book, Price/Operating Cash Flow and Forward P/E (each multiples with it’s pros and cons for each individual sector as a representative metric). Have a look for:

• the 'cheap' side: energy, real estate and utilities

• the 'expensive' side: technology & consumer discretionary

👉 On the mighty tech, a dedicated special chart: valuations over the past 35+ years!

Tech valuations = well BELOW both post-Covid & Dotcom bubble peaks, forward P/E:

• BigTech (dark blue): trading at 29x P/E versus the 2000s DotCom 62x P/E, while above the 22x median

• Software excluding Big Tech (green): trading at 31x P/E versus the 2000s DotCom 70x P/E, while above the 21.8x median

• Hardware + Semiconductors excluding Big Tech (light blue) trading at 20x P/E, versus the 2000s DotCom +75x P/E, while above the 15x median

👉 On the mighty tech, a dedicated special one for the Magnificent 7 ‘Mag 7 group

• Magnificent 7 stocks trade at way higher forward P/Es: from 23.5x for Google to 52.9x for Tesla, hence pulling up materially the 20.7x S&P 500 overall average

Complementary - the S&P 500, S&P 493 and the Magnificent 7 via forward P/E:

• Mag 7 with a 27x average

• S&P 493 at 17x, hence one can say that the S&P 493 might not be expensive now

Given the high 27x P/E values for the Mag 7, does it mean themselves are overvalued?

• not necessarily, actually they are just trading near their average value since 2015

Now let’s get granular and dive deeper inside the sectors via the single stocks that shape each of the 11 indices!

• Mission = chasing outliers, checking own names and connecting many own’s dots

• How? Via sleek scatterplots: the forward P/E multiple with Earnings/EPS growth (next year estimates) for a ‘Bottom-line’ view

• Interpretation: Forward P/E multiple the stock is trading for the given estimated consensus Earnings/EPS growth

• A simple rule of thumb: one aims to pay a low multiple for relatively high earnings growth, and/or check how justified a given multiple is for a given name

👉 XLK - Technology

• (Nvidia) NVDA, Super Micro Computer (SMCI), First Solar (FSLR) the outliers …

👉 XLC - Communications

• Netflix (NFLX) not chilling at all here … nor Facebook (META) & Google (GOOGL)

👉 XLY - Consumer Discretionary

• highlighting Tesla (TSLA), AirBnb (ABNB), Amazon (AMZN) and especially GM

👉 XLE - Energy

• highlighting Buffett’s Occidental Petroleum (OXY), Exxon (XOM), Chevron (CVX)

👉 XLRE - Real Estate

• highlighting the popular among retail Realty Income (O), and CBRE Group (CBRE)

👉 XLF - Financials

• first thing I always look here is Berkshire (BRK) and then Goldman Sachs (GS

• check also now Visa (V), Master Card (MA), MCO (Moody’s), MSCI Inc (MSCI) and S&P Global (SPGI)

👉 XLV - Health Care

• highlighting Eli Lilly (LLY) and pricey Illumina (ILMN)

👉 XLP - Consumer Staples

• highlight the mighty Costco (COST), Coca-Cola (KO) as the 1st stock I ever bought, Pepsi (PEP) and Archer-Daniels-Midland (ADM)

👉 XLI - Industrials

• highlighting General Electric (GE), 3M (MMM), John Deere (DE) & Axon (AXON)

👉 XLB - Basic Materials

• highlighting DuPont (DD) … they report earnings today Wednesday May 1st … an earnings call I like to jump into quite often, though not this time …

👉 XLU - Utilities

• highlighting Constellation Energy (CEG) which has also been quite in the news making all-time highs, besides that Dominion Energy (D) as the other outlier

📊 Special & Alternative Metrics: food for thought via sleek and intriguing charts

👉 S&P 500 (green), Hard (red) and Soft (black) economic data surprises:

• ‘Hard’ data surprises diverging again from ‘Soft’ data surprises (2024 vs 2023)

• Which one is the market following again? The hard econ data …

Hard VS Soft economic data = fundamental VS surveys & business cycle indicators …

• which one you rely more in general?

• Mav take: real fundamental data for the win medium-long term, but on the very short term not much changes prices more than sentiment …

N.B. ‘The Ultimate Compilation of Sentiment Metrics for the Economy and the Stock Market’

• is a project I’m working on these days and scheduled for 2024/2025 which will be delivered via a dashboard, a framework, a book(let) or so

• time will tell: a function of time, data, costs, resources etc … stay tuned!

👉 The recent rally has been more about P/E multiple expansion than fundamentals

• with good expected earnings, the beginning of the year returns were too good and too fast, and lately we did cool-off a bit which is normal

• overall, I am not concerned … +7% so far in 2024 is still very good

👉 S&P 500 stock buybacks:

• after falling in 2023, will likely exceed 900m in 2024 and $1 trillion in 2025

• the Magnificent 7 accounted for 26% of buybacks in the index in 2023, and Q4 filings show they're currently authorized to repurchase $215 billion in stock, 30% higher than the level authorized at the same time last year

👉 How about dividends vs buybacks?

• dividend yield at 230-year lows as buybacks proliferate, 1982 enabling quite a role

• sending a dividend, a tax event is created for investors … with buybacks, there is flexibility: one can create his own dividend when he /she wishes, if not, no tax

• companies that reduce share count via buybacks at low valuations, create value for shareholders and tend to outperform

Maverick eagle-eye on stocks buybacks & dividends during tough times:

• in corrections, recessions, panics I like to hunt for companies announcing share buybacks: not small amounts for ‘cosmetics’ and ‘PR’, but material programs which signal that the business model is solid, can weather the storm and that they are smart by creating value for shareholders - if it is a company that pays a regular dividend and they maintain it or even increase during those times, even better!

• during the 2020 Covid period, plenty of great companies did that and performed very well since then + great time to buy quality stuff via a big discount

👉 S&P 500 and Credit Spreads - a key long-term view:

• credit spreads are low at 9-10%, hence with low corporate default worries, the S&P 500 made quite some new highs in 2024, passed the previous all-time high that we had before the Russia-Ukraine war

• corporations are expected to have a good earnings season now this year, unlikely that we face a credit crunch in the near term despite we’re still in a high interest rate environment (more on that in my next state on the state of the US economy)

👉 S&P 500 Equity Risk Premium (ERP):

• negative for the first time since 2002, normally not good for future returns but also

• debatable for future returns: it stayed negative throughout the 80s-90s bull market

👉 S&P 500 and US bond yields for the equity-bond correlation:

• improving but still negative, watch for a reversal deeper into the negative territory … this is a ‘game’ around inflation uncertainty / certainty …

N.B. Inflation deep dive via my next special Macro report dedicated to this key topic is currently work in progress, with a likely release in the middle of May

👉 S&P 500 and central banks interventions:

• various periods of stress, where red circles denote critical stress signals triggered

• buying the dips has been very good, opportunity not throwing in the towel

👉 Special one: the S&P 500 secular bull market roadmap - monthly chart from 1928

• in 2024, the S&P 500 entered the 11th year of its secular bear market signaled on the breakout to new highs in 2023

👍 Bonus Charts 👍

👉 Remember Ghost Busters? ‘Who you gonna call?’ Maverick for myth busters! 👇

So, we often hear that the stock market anticipates (by 6 months) & prices in an incoming recession, but that isn’t quite true:

• 81% of the value drop happens during the ACTUAL recession, not 6 months prior

• S&P 500 drawdown during recession (dark blue bars) VS the drawdown including the time period 6-months prior to recession … let that one sink in

P.S. a very representative data set given almost 100 years, hence many business cycles

👉 S&P 500 price declines around recessions

• 12 recessions since WW2, we have a median of a 24% drop

• every recession and stock market decline that comes with it is different, yet a key note is: stocks bottomed and resumed upward long before recessions ended

P.S. this is price decline, it does not include dividends which you got (1.5 - 2.0% yearly)

S&P 500 drawdowns via the last 20 years as an alternative complementary view:

• 2007-2009 GFC was very bad, I was down 52%, yet hey, I am around, great lesson, great experience, into business owner mindset, not moving tickers on a screen …

• returns keep coming, compounding happens …

• same drawdown view but via calendar years

• A closer look at drawdowns since 2020, S&P 500 and the average retail investor:

S&P 500 with a -34% drawdown in 2020 Covid, and -25% in the 2022 bear market

How did retail investors do on average?

• -32% during 2020 Covid, -36% in 2022

• by now fully recovered … which is key … drawdowns are part of investing …

👉 S&P 500 intra-year declines & recoveries:

• 14.2% average declines in a given year should be something one is comfy with

• so that one can enjoy positive annual returns in most years, 33 out of 44 since 1980

👉 And another Maverick myth buster take - passive investing and S&P 500 are used like twin brothers and sisters, yet the S&P 500 is not as static as many believe:

• 1995-2022, there are on average 26 constituents changes each year, let that sink in!

👉 What happens with the S&P 500 when the FED starts to cut interest rates? Via the cutting cycles since 1965 (quite representative post WW2 economies):

• if rates cuts due to a recession then negative performance in the next 12 months

• quite positive on average (5%) and very positive in a soft landing scenario (15%)

S&P 500 and Inflation, a sensitive relationship during inflation surprises/uncertainty: post-inflation data and stock moves up or down since 2005:

• 2020 and 2022 were 2 years when inflation data (CPI) data moved stocks a lot as inflation started to come higher and higher and higher …

• yet check 2008-2009 … when we had both inflation and deflation uncertainty

Mav’s take on stocks and inflation: stocks are one of the best hedges for inflation … !

N.B. one day I’ll write a big piece on the key subject: Risk Management and Hedging!

• likely 2024/2025 and to be delivered via a dashboard, a framework, a book(let) or so

• time will tell: a function of time, data, costs, resources etc … stay tuned!

Moreover, specific baskets of stocks, can not just be a hedge against inflation but can benefit from it and outperforming … let that sink in!

Valuation and Sentiment via 1 sleek chart and going beyond the S&P 500, namely Global Equity Indices (MSCI ACWI Index) Above 200-DMA

• currently 66% of global stocks are trading above their 200 DMA

• we can see how that is far from the above 80% or even 90% levels that signal overvaluation and/or overheated market sentiment that happen before corrections

Complementary, solid earnings are expected for global stocks (MSCI ACWI Index)

• note, the recent pullback (red) diverged from the path of profit estimates (black)

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Did you enjoy this extensive research by finding it interesting, saving you time and getting valuable insights? What would be appreciated?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons! That’ll definitely support bringing in more & more independent investment research: from a single individual … not a bank, fund, click-baity media or so … !

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Have a great day!

Mav 👋 🤝

welcome to the 5th edition of the S&P 500 Report: Performance, Profitability, Sentiment & More = a unique report via data driven research and visually appealing charts that simply tell … 10,000 words!

A quarterly report given it’s comprehensive nature & fits well with both Bottom-Up & Top-Down approaches. Delivers a great overview via many angles for many use cases.

If you know a better and comprehensive S&P 500 coverage (free or paid), let me know!

N.B. this S&P 500 report focuses on Performance, Earnings, Profitability, Sentiment, Seasonality, Technical Analysis & More. The focus and deep dive dedicated to Valuation + Special & Alternative Metrics will be covered after separately.

Work in progress:✍️ The State of the US Economy in 45 Charts, Edition #3 live soon also! You can read the 2nd edition: ✍️ The State of the US Economy in 45 Charts, Edition #2.

And now, a perfect time for another S&P 500 deep dive as Q4 2023 earnings are over, and we are heading deep into Q1 2024 earnings.

Structured in 7 parts + bonus charts & designed to have a natural flow:

📊 Performance Ins & Outs

📊 Earnings, Profitability, Flows & Breadth

📊 Sentiment & Chatter

📊 Seasonality, Volatility & Short Interest

📊 Technical Analysis: Short Term & Long Term

📊 The 11 Sectors Performance Breakdown

👍 Bonus Charts 👍

📊 Performance Ins & Outs

Zooming out first for a big picture perspective - helpful away from the news & chatter:

Bears Make Headlines & Lose Money, Bulls Make Money! As always … !

The bear case sounds very smart very often, only problem is, it’s quite rarely right … !

The world moves forward thanks to DO-ers and optimists, not by talkers, doom-scrollers and fear-mongerers… people that act, take initiative, try, fail, try again … !

👉 S&P 500 last 30 years: +1,907% return for a 10.52% CAGR (compounded annual growth rate) = compounding surely works

👉 Last 10 years, more than tripled at 234% and 12.81% CAGR …

👉 Last 4 rather peculiar years with many events - since 2020 we had many outliers:

• the 2020 Covid pandemic

• ramping inflation & interest rates (from 0% to 5.5%)

• an energy crisis

• some banks that went bust (Credit Suisse in Europe, SVB & FRC in USA)

• a worldwide bottled supply chain

• a war in Europe between Russia and Ukraine

• now lately the Israel-Hamas war …

But, a key question: how did the S&P 500 do despite all that? Let this one sink in:

• +71.58% = 13.46% CAGR to investors = very good … relative to long-term averages, and especially given the recent context!

👉 2024 performance with a great start of the year:

• +9.10% for the SPY (weighted) while note the RSP (unweighted) +6.16%

👉 which makes us check for market concentration vs distribution - for that let’s chop the SPY and look inside of it via 2D: 2023 % returns & the holdings weightings:

• Super Micro Computer (SMCI) the big outlier in 2024 with a 215% return, though with a very small weight in the S&P 500, it barely contributes to the index return

• the big names with the heavy weights (boxers) carrying the index are: Nvidia, Microsoft, Meta/Facebook, Amazon + Elli Lilly, Berkshire, Google & JP Morgan

👉 now let’s make that visual into raw numbers via a return attribution analysis to see both leaders and laggards

• 4.97% (497 b.p. basis points) are coming from 7 stocks: Nvidia, Microsoft, Meta, Amazon + Elli Lilly, Berkshire, Google

• which is a 54.61% of the 2024 total performance (4.97/9.10), hence returns are concentrated, though way less than last year when the Magnificent 7 stocks drove even 68% of the returns: Apple, Microsoft, Google, Amazon, Nvidia, Meta & Tesla

• overall the rally has been broadening across the S&P 500 11 sectors relative to 2023

• check also the individual % returns which are positive from +12.28% for Google to a whooping +70.89% for Nvidia in 2024

Who are the leaders, clear! Who are the 7 laggards?

• surprise surprise: Apple and Tesla the biggest laggards in 2024

• check also the individual % returns which are negative from -11.91% for Apple to -31.64% for Boeing

👉 now let’s ignore weighting and switch to the S&P 500 unweighted components via the following 2D chart: 2023 % returns & Above 52-Week Low %:

• SMCI with an +868% return from the 52-week low … let that sink in !

• Nvidia following with a +223%, +Uber 155%, Constellation Energy Corporation +153%, Meta +147%, NRG Energy 137%

👉 continuing smoothly with the S&P 500 stocks above their 52-week lows & below their 52-week highs as my quick way to see both positive & negative momentum

• if you see some of your names in one of the extremes, it’s interesting to relate to the other close clusters, peers or market overall and derive insight from there

• interesting view for momentum traders/investor, and as always outliers are very interesting and can showcase some special situation going on there

👉 Complementary: filtering 2024 by single names in the 11 sectors and 24 industries, and where size = market cap

• Which one jumps to you and which one you own or find interesting?

👉 Value & Growth in 2024 for a styles view - growth leading like in 2023, but value also doing well this time around … sign also of a broadening rally …

• VUG growth (blue) +10.52% rally while VTV value (green) with just +8.18%

• Since 2020: growth (VUG) stepped in and helped a lot via it’s techie nature during the pandemic, while in the 2022 bear market value (VTV) came back and matched growth

• since 2023, growth is back big time the AI driven mega run, value doing fine also

Overall since 2020: growth (VUG) +93.73% & value (VTV) +49.93%, both very good!

Key note now on Value and Growth investing, relative performance:

• since 1926, there have been only 3 decades during which value stocks have underperformed growth stocks: 1930s, 2010s, and 2020s …

From my side, diversified across value and growth is a good idea at any given time, and I prefer a more value tilt at any given point in time - Dimensional makes the case:

• data covering nearly 100 years of the value and growth premiums: value outperforms by 4.1% and in years when it does, the average premium is nearly 15%

More nuance via factors:

• momentum (MTUM) with the big lead in 2024, followed by growth (IWF)

• small cap (IJR) and low volatility (USMV) the laggard in the start of the year

📊 Earnings, Profitability, Flows & Breadth

👉 Q4 2023 earnings season … good and surprising many

• revenue growth +3.7% = good

• earnings growth +10% = very good

👉 Profitability: actuals and estimates

S&P 500 EPS (earnings per share) forward 12-month & price:

• price action has been really good lately … quite some decoupling from EPS, hence markets pricing in solid earnings growth and a good economy

• one would have to follow this: material negative earnings surprises will likely impact price on the downside … in the end of the day, as I heard it on the street, it is all about earnings …

Can you show me how it’s all about the earnings? Yes, there you go:

• 2022-2023 earnings recession started to get revised higher with EPS growth from negative back to positive, so did the stock market rally started & came to town

Complementary, the S&P 500 EPS Actuals & Estimates via consensus:

• Quarterly bottom-up: 54.85 for Q1 2024, 59.30 for Q2 2024, then pace to pick up

Yearly bottom-up EPS actuals & estimates:

• 243 for 2024 and 276 for 2025 … no earnings recession on the horizon …

Goldman Sachs with an 8% EPS forecast for 2024 and 6% for 2025

S&P 500 Profit Margins:

• Ebit margin, Net margin are high, way above their averages … despite the high interest rates environment and macro-geopolitical issues

👉 Flows

S&P 500 (SPY) monthly financial flows (green/red) & total return (blue) since 2020:

• 2020 Covid crash: -$28.5bn in February, +$13.3bn with the March sharp rebound

• 2022 bear market: +$25.6bn in Dec 2021 right at the top, -$30.5bn in Jan 2022 to start the bear market and even bigger than the Covid crash, hence big outflows outliers are a good metric to watch for

• 2023 December was huge with almost $40bn, rally took another big step higher

• 2024 with January and February outflows, yet March with the rebound

👉 Breadth

• breadth used to stinky (words play) in 2023, not anymore

• we have a broader rally with over 80% of stocks above their 200-day moving average … suggesting further upside potential

📊 Sentiment & Chatter

👉 Sentiment:

• The Fear & Greed index shows slight GREED at 56, not far from the same situation last week, last month or during the past year as the rally was rolling

American Association of Individual Investors’ (AAII) weekly survey of members

• Sentiment is strong, though not bubbly currently

BofA’s sell side indicator:

• equity sentiment ticked up 22 bp in March, no euphoria levels

• latest reading is 55% which is right there with the 15-year average, and far from both Sell and Buy thresholds (58% / 51.3%)

BofA’s Global FMS sentiment:

• most bullish since January 2022

• though no extreme levels to indicate extreme bullishness or bearishness

👉 Chatter

AI, to begin with:

• 179 cited the term “AI” during their Q4 20203 earnings call = 2nd-highest number going back to at least 2014

• current record is 181, which occurred in Q2 2023

• the term “AI” was mentioned more than 50 times on the earnings calls of nine S&P 500 companies, led by … you guessed it, NVIDIA at 114!

Supply chains:

• in earnings calls from the fourth quarter of 2023, fewer firms discussed supply chains than at the peak of congestion in late 2021 and 2022

• much of the commentary centered around how companies have improved supply chains following pandemic-era bottlenecks

The ‘R’ rated chatter, namely Recession!

• cooling off more and more: lowest number of S&P 500 companies citing “recession” on earnings calls for a quarter since Q4 2021

• interesting also to note that the term “soft landing” was cited on the Q4 earnings calls of 37 S&P 500 companies = highest number of S&P 500 companies citing the term “soft landing” on quarterly earnings calls going back at least three years

Schwab Trading Activity Index (STAX):

• investment exposure increased during the four-week period ending March 28, 2024, ending with a STAX score of 51.65. This ranks "middle" compared to historical averages

• More Schwab clients bought equities than sold, which contributed to the increase in the STAX score during the March STAX period

• Clients were also net buyers on a dollar basis. Buying was most pronounced within the information technology, health care, and consumer staples sectors

📊 Seasonality, Volatility & Short Interest

👉 Seasonality

• Presidential and non-presidential election years

S&P 500 is now quite ahead (green) to where it normally tends to be in both non-presidential & presidential election years going back to 1976. Once election day is over, equities typically rally as uncertainty is resolved.

US Presidential Cycle year 4 is supportive of higher S&P 500 (same for the USD, rather supportive for Oil and about 50/50 for the US 10-year yields)

• Taxes seasonality via the S&P 500 average path during April since 1985 = selling into tax day, but don’t go away (like in May), as the bounce is incoming to town

• Monthly seasonality: April a good month historically

👉 Volatility

• VIX (blue) at 15.22 is well above the 20-year average 19.13 - in an election year we should see volatility picking up a few times

• until then: stocks hovering at all-time highs, portfolios high, confidence, sentiment, spending, investing

• makes it cheap to hedge these days = hedge / protect gains when you can and cheap, not when you must and expensive

👉 Short Interest

• S&P 500 short interest has been dropping more and more, the more the stock market rally started to be strong and stronger since 2023

• at the sector level: Industrials, Materials and Utilities the most shorted sectors, while Tech and Communication the least (as expected)

📊 Technical Analysis: Short Term & Long Term

👉 Short Term:

• trending nicely in an upward channel once we left the 2022 bear market

• 50-day moving average as a first support level at 508, while the 200-day moving average as a second support level at 463

• the RSI at 47 showing neither oversold nor overbought territory

👉 Long Term:

• since Q4 2023, we have been going basically straight up, hence departing from the 50-week and 100-week moving average, which are support levels at 458 and 426

• keep in mind big inflections points when long term moving averages are crossed

📊 The 11 Sectors Performance Breakdown

👉 2024 performance of the 11 Sectors that shape the S&P 500 - you would not guess which sector is leading in 2024 … as I did not see it mentioned out there …

• no, it's not tech, it's not communication services

• it is ... drum rollllsss ... Energy (XLE)! Yes, energy is back +15.59% ... followed by Communications (XLC) +12.24% and Industrials (XLI) with +8.15 ...

• Real Estate (XLRE) -6.41% and Consumer Discretionary (XLY) -0.73% = the laggards and the only 2 sectors out of the 11 that are negative so far

• the spread between the Top (XLE) and Bottom (XLRE) sectors is 22% which is not big, especially compared to 2023 when it was even 57% (Tech vs Utilities)

Hence, the main take-away is simple: 'the rally is broadening bro …!'

• Energy (XLE) relative to Tech (XLK): energy with an outperformance over the mighty tech … it will be very interesting if the leadership shift stays in 2024

• Another sign of a broader rally? not just tech (XLK), but also Industrials (XLI) with multi all-time-highs as industrials are a key sign from the real economy side

👉 Let’s go 2D: 2023 % returns & Above 52-Week Low % for the 11 Sectors + S&P500

• Check also those big bounces from the 52-week lows % ... all sectors rebounded

👉 before we go into each of the 11 sectors, let’s see an overarching theme since a while, specifically zooming out to check the ‘techie’ trend since more than a decade:

‘Tech is taking over the world baby!’ - Tech relative to S&P 500 since 1985:

• during Covid it broke the +1 standard deviation while in 2023 with the AI run even the +2 SD

• while tech today is real, integrated into the economy big time, works and brings a lot of value (2001 dot-com empty concepts many) ... it's hard to ignore the parabolic run lately

• note: I compare it not to some empty/unprofitable/volatile sector, but to the mighty S&P 500 ... which is not a shabby construct at all, it's the 11 sectors of corporate America which also derives 40% of revenues from outside the US ... and has performed very well since many many decades …

• note: ratio has been falling in 2024, which is another sign of a broadening rally

Your feedback? Food for thoughts …

👉 have you ever wondered on Sector dominance historically (since 1960) ?

• Energy and Materials (Industrial Revolution vibes), then

• Consumer Staples and Discretionary

• Financials and Real Estate (bubble and excesses of 2007-2009

• currently the 2-tech heavy sectors dominates big big time and for quite a while …

And now let’s zoom into the Price/Performance of the 11 sectors via scatterplots: 2023 % returns & above 52-week low % returns. General use cases for this visuals? Check for outliers, market leaders & laggards, positive/negative momentum, relative strength and/or likely un/warranted cheap /expensive stocks:

👉 XLY - Consumer Discretionary:

• Amazon (AMZN), Deckers (DECK), Domino’s Pizza (DPZ), Chipotle (CMG), GM (GM) rolling in the green sweet spot

• LULU (LULU) is LULU in 2024, Tesla (TSLA), Etsy (ETSY), Starbucks (SBUX), McDonalds (MCD) down in 2024 and not a lot above their 52-week low

👉 XLP - Consumer Staples:

• Kroger (KR), Dollar General (DG), Costco (COST), Target (TGT) rolling …

• Walgreens (WBA), Philip Morris (PM), less so …

👉 XLE - Energy:

• sector is leading in 2024, and quite a broad rally across the entire sector

👉 XLF - Financials:

• many names positive in 2024 and with big rebounds from the 52-week low

• Progressive Corporation (PGR) and MarketAxess Holdings (MKTX) the outliers

• Berkshire (BRK) +13% in 2024, and a great 28.73% from the 52-week low

👉 XLV - Health Care:

• Eli Lilly (LLY) the big outlier on the positive side, Moderna (MRNA) to be noted as positive in 2024 and with a big bounce from the 52-week low

👉 XLI - Industrials:

• Industrials are doing fine in 2024 and with nice rebounds from the 52-week lows

• GE (GE) a top performer in 2024, check also Uber (UBER) with the rebound

• Boeing (BA) on its worst losing streak since 2018 on safety & CEO issues

👉 XLB - Basic Materials:

• most names doing fine in 2024 and also rebounding nicely from the 52-week low

👉 XLRE - Real Estate:

• sector down overall in 2024, hence also most names

• notice though the Digital Realty Trust (DLR) as the outlier in this space … along Iron Mountain Incorporated (IRM) Simon Property Group (SPG)

👉 XLK - Technology:

2 big outliers: Nvidia (NVDA) and the new in town, Super Micro Computer (SMCI)

• SMCI with +216% in 2024 & 864% from the 52-week low is such an outlier that the other names cannot be seen, hence 2 charts where in the 2nd I exclude/hide SMCI

• NVDA (NVDA) very well also in 2024 with 78% and 236% from the 52-week low

• Cisco (CSCO), Intel (INTC) and Adobe (ADBE) not doing well in 2024

Bonus chart on Super Micro Computer (SMCI) as it deserves one:

• AI driven demand + Operating Leverage + Multiple Expansion = makes it for a very big growth in revenues

👉 XLC - Communications:

• Meta (META) the big positive outlier, followed by Netflix (NFLX), Google (GOOGL), Disney (DIS) and Live Nation Entertainment (LIV)

• fun note on META/Facebook: a mega rebound, currently in the MetaVerse … all that Mark’s training to fight Musk in the ring helps it seems ;)

👉 XLU - Utilities:

• NRG Energy (NRG) & Constellation Energy Corporation (CEG) the two positive outliers while as the sector is down in 2024, many names still negative

👍 Bonus Charts 👍

👉 We are in a bull market, is it outsized relative to history (since 1949)? No!

• we are in the lower range

• specifically, we are even below the average for the past 12 bull markets

👉 Visualizing 150 Years of S&P 500 Returns

• like a bell curve, the majority of returns fall near the middle, with the highest number of returns in the 10% to 20% range.

• the best year was in 1933, when the market soared almost 54% during the Great Depression after it faced its worst year just two years earlier, plummeting 43% amid the collapse of the U.S. banking system; the last time stocks tumbled nearly that far was in 2008 when we had the Global Financial Crisis

👉 S&P 500 rolling 4 months change

• current rally is typical of either a post-recession rally or a bubble, your opinion?

• I think rather a post-recession rally … it’ll be hard in 2024 to have a big correction with all the fiscal spending, election year & likely 1-3 interest rate cuts

👉 Investing at all-time highs as we have these days, is it problematic or so?

• on average since 1970, the S&P 500 has done better 1, 3, and 5 years after making an all-time high than picking a random day

👉 Workers needed at S&P 500 companies to generate $1 million revenue

• from almost 8 before 1990 … to only 2 in 2024 …

• however, when adjusted for inflation it is almost 6m hence around a 15% decline which is not a lot in 40 years

• also note the uptick increase since 2020 which is surprising I would say

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first of all, thank you very much to all the folks that did donate/tip this ad free & paywall free publication which is all about independent investment research. Namely, hats off to Vinny G., Johanna K., Darryl B., Arny T., Don C., Rhino I., and all the anonymous individuals that showed their generosity which is highly appreciated! (for privacy reasons, I didn’t post the full name which is the best approach I would say).

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Welcome to the 4th edition of the S&P 500 Report, a unique report via data driven research & visually appealing charts that simply tell 10,000 words. If you know a better and more comprehensive S&P 500 coverage (free or even paid), please let me know!

This S&P 500 coverage focuses on Performance, Profitability & Special Metrics. Valuation focus and deep dive will be covered in the dedicated ‘Valuation’ section.

A perfect time for another S&P 500 deep dive now that the Q3 2023 earnings are out.

Structured in 7 parts + bonus charts & designed to have a natural flow:

📊 Performance Ins & Outs

📊 Earnings, Profitability, Flows, Value & Growth

📊 Sentiment & Chatter

📊 Seasonality, Volatility & Breadth

📊 Technical Analysis: Short Term & Long Term

📊 The 11 Sectors Performance Breakdown

📊 Special & Alternative Metrics

👍 Bonus Charts 👍

📊 Performance Ins & Outs

👉 Bears Make Headlines & Lose Money, Bulls Make Money! As always …

S&P 500 last 30 years: +1,723% return with 10% CAGR … compounding surely works …

👉 Last 10 years, more than tripled at 205% and 11.8% CAGR …

👉 Since 2020 we had many outliers: a pandemic, ramping inflation & interest rates (from 0% to 5.5%), an energy crisis, some banks that went bust (Credit Suisse in Europe, SVB & FRC in USA), a worldwide bottled supply chain, a war in Europe, then now Israel Hamas war …

A key question now: how did the S&P 500 do despite all that? Let this one sink in:

• +50% = 10.8% CAGR to investors = very very good … given the recent context!

• Recall “The first rule of compounding: never interrupt it unnecessarily.” Munger

• for that not to happen, one should have a solid plan, a good broker that does not charge them very high fees, and consider taxes when optimising own investments

👉 2023 performance now: great +20% for SPY while note the unweighted RSP +7%

• divergence started in March when the recent AI breakthroughs & narrative took over completely the center stage

• I am quite certain that there will be big AI winners in the next 5-20 years, though also certain that many will pump their AI capabilities and real world use cases, hence hype is almost a given, hence down the road many will naturally deflate…

👉 this signals us that the 20% SPY return must be concentrated and not distributed

Let’s chop the SPY and look inside of it via: 2023 % returns & the holdings weightings

• guess who is there with the big weights & big returns? The techie Magnificent 7: Apple, Microsoft, Google, Amazon, Nvidia, Meta and Tesla

Let’s make that visual into raw numbers via a return attribution analysis to see the M7 group effect on the S&P 500 overall

• 13.75% (1375 b.p basis points) are due to just 7 stocks

• which is a whooping 67.96% of the 2023 total performance (13.75/20.23)

Let that sink in! And bring the sink if you feel like 😉

Who are the leaders, clear! Who are the 7 laggards?

• their weight is small in the index, but note that some of the individual % returns are materially negative in 2023: Pfizer, Moderna, Chevron, NextEra Energy, Bristol-Meyers with material drawdowns

👉 now let’s ignore weighting and switch to the S&P 500 unweighted components via the following 2D chart: 2023 % returns & Above 52-Week Low %:

• Nvidia off the charts the mega outlier after the recent AI driven parabolic run

• followed by Meta, Royal Caribbean, Carnival, Palo Alto, Pulte Group & Tesla

👉 Complementary: single names in the 11 sectors and 24 industries, size = market cap

• Which one jumps to you and which one you own or find interesting?

👉 continuing smoothly with the S&P 500 stocks above their 52-week lows & below their 52-week highs as my quick way to see both positive & negative momentum

• if you see some of your names in one of the extremes, it’s interesting to relate to the other close clusters, peers or market overall and derive insight from there

• interesting view for momentum traders/investor, and as always outliers in are very interesting

📊 Earnings, Profitability, Flows, Value & Growth

👉 Q3 2023 earnings season

• Earnings Growth: earnings growth for the S&P 500 is 7.2% and Q3 marks the first quarter of Y-o-Y earnings growth since Q3 2022 (top-line revenue growth at 1.8%)

• Earnings Guidance: for Q4 2023, 69 S&P 500 companies have issued negative EPS guidance and 38 S&P 500 companies have issued positive EPS guidance

• Earnings Scorecard: 82% of S&P 500 companies have reported a positive EPS surprise and 62% of S&P 500 companies have reported a positive revenue surprise

👉 Profitability

S&P 500 Profit Margin:

• stabilizing right around the historical trend line after the big rebound post-pandemic - the very high NPMs I think were possible because the mighty S&P 500 companies have pricing power, hence could squeeze quite some

• Did the mighty S&P 500 companies cause inflation? No! Now did they take advantage of inflation? Rather yes I would say … thoughts?

S&P 500 EPS (earnings per share) forward 12-month & price:

• back to earth & more aligned after the FED (and fiscal policy) induced parabolic run once the Covid outbreak

• when stock prices go way way above earnings/EPS consider getting cautious ...

• fundamentals matter always sooner or later - in the end of the day, as I heard it on the street, it is all about earnings (not stories, but they do ‘work’ short-term)

Complementary, the S&P 500 EPS Actuals & Estimates via consensus bottom-up:

• Quarterly bottom-up: 58.9 for Q3, 54.95 drop for Q4, then pace to pick up

Yearly bottom-up EPS actuals & estimates:

• 221 for 2023 & 246 for 2023. No earnings recession on the horizon …

👉 S&P 500 (SPY) monthly financial flows (green/red) & total return (blue) since 2020

• 2020 Covid crash: -$28.5bn in February, +$13.3bn with the March sharp rebound

• 2022 bear market: +$25.6bn in Dec 2021 right at the top, -$30.5bn in Jan 2022 to start the bear market and even bigger than the Covid crash, hence big outflows outliers are a good metric to watch for

Now in 2023:

• +$18bn in May as this time it was NOT sell in May and go away because they were bigger even than the October 2022 +$14.5bn local bottom which told us there is another leg higher in the 2023 rebound

• November good with +6.35bn, for December I aim for positive inflows for Christmas mini-rally, but not a strong one, November was a big +month already (one of the strongest November gains on record)

👉 Value & Growth in 2023 for a styles view - growth leading as expected

• VUG growth (blue) +40.5% rally while VTV value (green) with just +4.2%

• Since 2020: VTV value (green) did match VTG growth (VUG) for a good part of the 2022 bear market, now Growth is back big via the AI driven run!

Key note now: since 1926, there have been only three decades during which value stocks have underperformed growth stocks: 1930s, 2010s, and 2020 …

More nuance via factors: growth (IWF) off the charts with the big lead, whereas high dividend yield (VYM) the laggard in 2023

📊 Sentiment & Chatter

👉 Sentiment:

• Both retail and professional investors believe their personal investments will do better in 2024

• After the 2022 bear market, retail investor sentiment picking up materially though dipped in November, exactly when a material happened …

• The Fear & Greed index shows GREED at 64, which is way above the Fear 40 from 1 month ago

• BofAs most broadest measure of Fund Manager Survey sentiment (based on cash positions, equity allocation & economic growth expectations) rose to 2.6 from 1.7 = largest monthly rise since Nov’21

👉 Chatter

AI chatter cooling off … was about time

• 152 companies cited the term “AI” during their Q3 earnings calls

• this is 16% less when compared to Q2 2023 (180)

The ‘R’ rated chatter: Recession chatter cooling off … was about time after the most anticipated recession ever that we ‘have’ since 2021-2022

Inflation chatter cooling of also … as expected

• number of inflation discussions trending lower and lower during earnings calls

Inflation & hawkish central banks used to be the biggest ‘tail risk’, though it has dropped materially month after month lately, while replaced now by Geopolitics

Job Cuts vs Labor Shortages

• labor shortages less and less of a talking point while note an uptick in job cuts

• job market normalising after it has been very hot for quite some time

• sectors wise, Tech and Financials with the most intense job cut chatter

📊 Seasonality, Volatility & Breadth

👉 Seasonality - it’s that time of the year … December Christmas rally

• S&P 500 has typically outperformed in the 5 days before and after Christmas

• To hold true in 2023 or did Santa come early this year in the good November?

I expect a positive month, not a big rally … mainly because of the very good November, but guess what? I hope to be wrong 😉

• Quarterly wise, since 1985 we have a 6.1% return in Q4 which is very good

Personally, I expect less given already a great year, but sure, I hope to be wrong 😉

👉 if you want to look ahead of December, how does January look like?

• after good/great annual gains (like 2023), January is negative of flat

Overall, a key chart message: we are trading similar to the consolidation phases after the last two big market breaks: dot-com burst of 2000 & 2008 Lehman bankruptcy

👉 Volatility

• 2023 stock market rally caused VIX (indicator of market uncertainty) to fall in June to its lowest level in more than 3 years (since January 2020)

• November rebound and very good sentiment caused VIX to go even lower

👉 Breadth

• breadth is not stinky anymore: % of S&P 500 stocks trading above their 50 day moving average shot up lately

📊 Technical Analysis: Short Term & Long Term

👉 Short Term:

• trending nicely in an upward channel once we left the 2022 bear market

• however, the RSI at 69 in oversold conditions as it signalled also before local tops

• 200-day moving average as a support level at 429

👉 Long Term:

• after the great November, above both 50 & 100-week moving averages which are now support levels going forward, 424 and respectively 415 levels

• RSI in overbought territory at the 68 level which often signals a move lower

📊 The 11 Sectors Performance Breakdown

👉 2023 performance of the 11 Sectors that shape the S&P 500:

• XLX (Tech), XLC (Communications) & XLY (Consumer Discretionary) leading

• 56.8% huge spread between the Top & Bottom sectors which is very rare to see: XLC (Communications) + 49.24% while Utilities (XLU) -7.62%

👉 Let’s go 2D: 2023 % returns & Above 52-Week Low % for the 11 Sectors + S&P500

• XLK, KLC & XLY also with the momentum from their 52-week lows

• note: Real Estate XLRE and Financials XLF bouncing back from the 52-week lows

👉 Let’s zoom out to check the techie trend - ‘Tech is taking over the world baby!’

Tech relative to S&P 500 - $XLK ETF VS $SPY ETF since 1985:

• during Covid it broke the +1 standard deviation while in 2023 with the AI run even the +2 SD

• while tech today is real, works and brings a lot of value (2001 dot-com empty concepts many) ... it's hard to ignore the parabolic run lately

• and note: I compare it not to some empty/unprofitable/volatile sector, but to the mighty S&P 500 ... which is not a shabby construct at all, it's the 11 sectors of corporate America which also derives 40% of revenues from outside the US ... and has performed very well since many many decades … thoughts?

Your feedback? Food for thoughts …

👉 Sectors relative rotation graph, hunting for relative strength & momentum:

• Leaders: XLRE, XLY, XLF, XLB, XLI

• Improving: XLE, XLV, XLU

• Weakening: XLK

• Laggers: XLP, XLC

👉 Short Interest breakdown for the 11 sectors: Industrials XLC the most shorted, Tech (XLK), Communication Services (XLC), Real Estate (XLRE) the least

👉And now let’s zoom into the Price/Performance of the 11 sectors via scatterplots: 2023 % returns & above 52-week low % returns. General use cases for this visuals? Check for outliers, market leaders & laggards, positive/negative momentum, relative strength and/or likely un/warranted cheap /expensive stocks:

• XLY - Consumer Discretionary: Tesla (TSLA) & the cruisers Royal Caribbean (RCL) and Carnival (CCL) rocking the boat …

• XLP - Consumer Staples: Costco (COST) keeps bringing the goodies, while let’s note also Dollar General’s rebound from the 52-week low after a very rough patch

• XLE - Energy: Exxon, Oxy and CVX down in 2023 after some great runs, key names to watch for a rebound

• XLF - Financials: a mixed bag as pretty much most of the times: PayPal (PYPL) continuing the slide in 2023 while ZION with a big rebound from the 52-week low

• XLV - Health Care: quite some names down this year while Eli Lilly (LLY) the big outlier on the positive side

• XLI - Industrials: General Electric (GE) and FedEx (FDX) the big leaders, while note John Deere (DE) is down in 2023 (after record gains since 2020)

• XLB - Basic Materials: quite some names rebounding nicely from the 52-week low … infrastructure needs and demand anyone? … I would say so …

• XLRE - Real Estate: Digital Realty Trust (DLR) the outlier in this space …

• XLK - Technology: Nvidia (NVDA) the big outlier, AI AI AI … Cisco, a laggard

• XLC - Communications: META/Facebook with a mega rebound, currently in the MetaVerse … all that Mark’s training to fight Musk in the ring hlpe it seems ;) Google (GOOG) & Netflix (NFLX) not chilling anymore with a nice rebound also …

• XLU - Utilities: NRG Energy (NRG) & Constellation Energy Corporation (CEG) the two positive outliers while most names down in 2023

📊 Special & Alternative Metrics

👉 We often hear that the stock market anticipates (by 6 months) & prices in an incoming recession, but that isn’t quite true

• 81% of the drop in value happens during the actual recession & not 6 months prior

• S&P 500 drawdown during recession (dark blue bars) vs the drawdown including the time period 6-months prior to recession … let that one sink in!

👉 The big chatter in the markets is the scenario in which the FED starts cutting rates which is priced in by the FED funds futures now. Hence, the big key question is: how does the S&P 500 perform around the start of FED cutting cycles?

• without a recession, actually cuts are beneficial with +11% in 12 months

• with a recession, a 19% drawdown & -14% 12 months later which is not a biggie

N.B n = 8 and n = 3, not a big sample, but it’s what we have for the last 8 cycles

👉 S&P 500 EPS to be boosted by AI for the next 20 years by +0.5% in annual growth driven by widespread AI adoption (0.5% seems not a lot, but CAGR aka compounded)

👉 S&P 500 set to triple to 14,000 by 2034 via the generational cycles:

• current 16-18 year cycle likely to peak around 2023

• 3x might sound ridiculously high? It is highish but not crazy and that is because: a) reaching 14,000 would imply around 11% annualised returns which is not that uncommon b) not too long ago in 2010 the S&P 500 was at 1,000

👉 How is the S&P 500 dealing with the high & fast rising rates environment?

• debt service burden is extremely light

• strong Corporate America is also a reason for why the most anticipated recession did not happen

Complementary angle to answer, ‘how comes rates are not impacting S&P 500?’

• almost half of the S&P 500 is set to mature AFTER 2030

• hence, rate hikes have had not much of an impact on their interest expense so far

• also, many of the S&P 500 companies have big pricing power etc

👉 The Power of Dividends in the S&P 500:

Dividends contributed almost 30% to the 10.4% annual total returns of the S&P 500 over the long run. Some further key notes:

• In the 1970s, a decade characterized by high inflation and weak economic growth, dividends made up 70% of total returns

• The 1990s—the decade of the dot-com bubble—had the lowest contribution from dividends of just 15%

• The 2000s was the only decade with negative total returns: the dividend returns of nearly 2% provided a cushion to offset negative price returns driven by the bursting of the dot-com bubble and the Global Financial Crisis

👍 Bonus Charts 👍

👉 Share of the 11 S&P 500 sectors and their capitalisation shifting over time …

• utilities and real estate with just 2% while tech with 27%

Now contrast that with the Net Income contribution of each sector

• tech 27% with 18%

• energy 5% with 11%

• financials 13% with 22%

Your thoughts on the historical evolution and nowadays situation?

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

What would be appreciated? JUST sharing it around with like-minded people and hitting the ❤️ button. This will boost bringing in more and more independent investment research … from an independent guy with a laptop & sometimes 2 screens, usually writing from a library, home or while commuting via a train in Europe.

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Looking forward for your feedback, questions & thoughts … Thank you!

Have a great December!

Mav 👋 🤝

welcome to the 3rd edition of the S&P 500 Report, a unique & comprehensive report via data driven research & visually appealing charts that simply tell 10,000 words. A perfect time for another S&P 500 deep dive now that the Q2 2023 earnings are over.

N.B. This S&P 500 coverage focuses on Performance, Profitability & Special Metrics. Valuation lens will be covered in the dedicated ‘Valuation’ section, prior edition here: ‘Maverick Valuations #2 - USA: Dow Jones, Nasdaq 100 & the mighty S&P 500’

Structured in 6 parts + bonus charts & designed to have a natural flow:

📊 Performance Ins & Outs

📊 Earnings, Profitability, Flows, Value & Growth

📊 The 11 Sectors Performance Breakdown

📊 Sentiment, Seasonality, Volatility

📊 Technical Analysis: Short Term & Long Term

📊 Special & Alternative Metrics

👍 Bonus Charts 👍

📊 Performance Ins & Outs

👉 Bears Make Headlines & Lose Money, Bulls Make Money!

S&P 500 last 30 years: +1,700% return with 10% CAGR … compounding surely works …

👉 Since 2020 we had many outliers: a pandemic, ramping inflation & interest rates (from 0% to 5.5%), an energy crisis, some banks that went bust (Credit Suisse in Europe, SVB & FRC in USA), a worldwide bottled supply chain & a war in Europe.

A key question now: how did the S&P 500 do despite all that?

• +43.23% = 10.11% CAGR to investors = very very good given the recent context!

• Recall “The first rule of compounding: never interrupt it unnecessarily.” Munger

• for that not to happen, one should have a solid plan, a good broker that does not charge them very high fees, and consider taxes when optimising own investments

👉 2023 performance now: a great 14.46% with a dividend yield of 1.43%

👉 Key note #1: after we had the 2022 bear market (biggest since the 2007-2009 GFC), it follows the typical no-recession recovery path currently

👉 Key note #2: 14.46% return is concentrated in a few names or more distributed?

• 2023 % returns & the holdings weightings

• return attribution analysis tells us exactly that 10.61% (1061 b.p basis points) are due to just 7 stocks, the M7 (Magnificent Seven) tech stocks: Apple, Nvidia, Microsoft, Amazon, Meta/Facebook, Tesla & Google/Alphabet.

• hence, 73.37% (10.61/14.46) of the 2023 performance is due to the M7 tech stocks

Let that sink in! And bring the sink if you feel like 😉

The laggards are the following 7 stocks: their weight is small in the index, but note that most of the individual returns are materially negative in 2023: Pfizer, Schwab, Bank of America, Nike, Dolla General and J&J as household names

The major M7 stocks positive contribution is also showcased via the returns of the weighted (SPY) VS equal weighted (RSP)! The weighted SPY outperforming big time!

• note that it started in March when the recent AI breakthroughs & narrative took over completely the center stage

• I am quite certain that there will be big AI winners in the next 5-20 years, though also certain that many will pump their AI capabilities and real world use cases, hence hype is almost a given, hence down the road many will naturally deflate…

👉 now let’s ignore weighting and switch to the S&P 500 unweighted components via the following 2D chart: 2023 % returns & Above 52-Week Low %: Nvidia the mega outlier after the recent AI driven parabolic run, followed by Meta & Tesla

Complementary by single names in the 11 sectors and 24 industries, size = market cap

👉 continuing smoothly with the S&P 500 stocks above their 52-week lows & below their 52-week highs as my quick way to see both positive & negative momentum

• if you see some of your names in one of the extremes, it’s interesting to relate to the other close clusters, peers or market overall and derive insight from there

📊 Earnings, Profitability, Flows, Value & Growth

👉 2023 Q2 earnings season:

• revenue growth +0.5% going against the most anticipated recession ever talks

• earnings growth -2.8% which is expected to be back positive in Q3 and taking off starting with Q4 … that is rather too optimistic in my view, but still I see expect decent positive developments earnings wise

👉 Profitability:

S&P 500 Net Profit Margins (ex-Financials & Energy) sequentially improving lately

S&P 500 EPS (earnings per share) forward 12-month & price

• back to earth & more aligned after the FED (and fiscal policy) induced parabolic run once the Covid outbreak

• when stock prices go way above earnings/EPS consider getting cautious ...

• fundamentals matter always sooner or later. In the end it is all about earnings I heard on the street …

Complementary, the S&P 500 EPS Actuals & Estimates via consensus bottom-up:

• 221 for 2023 & 247 for 2023. No earnings recession on the horizon …

👉 Industry analysts median forecast +19.0% return in the next 12 months

• imo likely too optimistic, I target for less & would be surely happy with less as well

Side personal note here, in investing (but not only):

• better to have less expectations than high ones, if results are higher than it’s just a very nice and welcomed surprise

• key to be realistic: would be great another 19% to compound on top of the 14.46% this year, but it will be tough with high interest rates which are seen now as they will be ‘higher for longer’ among other reasons

• as you might have noticed, true and genuine research aims to stay grounded and withing what’s realistically possible: this is not a ‘trading room’, not a place where people are lured in for ‘multi-baggers’ ‘generational wealth’ ‘10-100x your money’ and get rich quick schemes … plenty of scams and places like that out there…

👉 S&P 500 (SPY) monthly financial flows (green/red) & total return (blue) since 2020:

• 2020 Covid crash: -$28.5bn in February, +$13.3bn with the March sharp rebound

• 2022 bear market: +$25.6bn in Dec 2021 right at the top, -$30.5bn in Jan 2022 to start the bear market and even bigger than the Covid crash, hence big outflows outliers are a good metric to watch for

• 2023: +$18bn in May as this time it was NOT sell in May and go away because they were bigger even than the October +$14.5bn local bottom which told us there is another leg higher in the 2023 rebound

Going forward, I do not expect extreme outflows nor inflows which are to be watched as reasoned above, while I aim for positive inflows in December for a Christmas rally.

👉 Value & Growth via the investing styles lens:

• VUG growth (blue) +28.53% rally while VTV value (green) with just +1.24%

3-year timeframe: we see how value VTV value (green) did match VTG growth (VUG) for a good part of the 2022 bear market, now Growth is back big via the AI driven run!

More nuance via factors: growth (IWF) leading & momentum (MTUM) lagging in 2023

📊 The 11 Sectors Performance Breakdown

👉 2023 performance of the 11 Sectors that shape the S&P 500:

• XLC (Communications) & XLK (Tech) & XLY (Consumer Discretionary) leading

• 46% huge spread between the Top & Bottom sectors which is very rare to see: XLC (Communications) + 37.7% while Utilities (XLU) -8.49%

👉 The 11 Sectors + S&P500 itself (SPY) with 2023 % returns & Above 52-Week Low % for an extra dimension and same key message:

• XLK, KLC & XLY also with the momentum from their 52-week lows

• note, energy is bouncing back also from the 52-week lows

👉 Sectors rotation graph for relative strength & momentum dimensions:

• Energy (XLE) leading while note the weaking Tech (XLK)

👉 Short Interest breakdown for the 11 sectors: Industrials (XLI) the most shorted, Tech (XLK) and Communication Services (XLC) the least

👉 Industry analysts 12 month median forecast / target price for the 11 sectors:

• Tech (XLK) the most optimistic while Energy (XLE) the least

👉And now let’s zoom into the Price/Performance of the 11 sectors via scatterplots: 2023 % returns & above 52-week low % returns. General use cases for this visuals? Check for outliers, market leaders & laggards, positive/negative momentum, relative strength and/or likely un/warranted cheap or expensive stocks:

• XLY - Consumer Discretionary: Tesla (TSLA) & the cruisers Royal Caribbean (RCL) and Carnival (CCL) rocking the boat …

• XLP - Consumer Staples: Dollar General the big story on the negative side, Costco (COST), Walmart (WMT) & Mondelez (MDLZ) keep bringing the goodies…

• XLE - Energy: most energy names making a nice comeback …

• XLF - Financials: a mixed bag as pretty much most of the times, PayPal (PYPL) continuing the slide in 2023 while Arch Capital Group (ACGL) +30% in 2023 and almost 2x since the 52-week low

• XLV - Health Care: many names down this year while West Pharmaceutical Services (WST) the big outlier on the positive side

• XLI - Industrials: General Electric (GE) and FedEx (FDX) the big rebounders …

• XLB - Basic Materials: many names rebounding nicely from the 52-week low … infrastructure needs and demand anyone? …

• XLRE - Real Estate: Welltower (WELL) the outlier in this space …

• XLK - Technology: Nvidia (NVDA) the big outlier, AI AI AI …

• XLC - Communications: META/Facebook with a mega rebound, currently in the MetaVerse … with the CEO planning and training to fight Musk in the ring ;). Google (GOOG) & Netflix (NFLX) not chilling anymore with a nice rebound also …

• XLU - Utilities: Constellation Energy Corporation (CEG) a big outlier …

📊 Sentiment, Seasonality, Volatility

👉 Sentiment: retail investors, institutional & mixed/composite indices

• After the 2022 bear market, retail investor sentiment is picking up materially

• BofA fund manager survey: despite global growth expectations being more pessimistic with net 53% expecting a weaker economy over the next 12 months, there is optimism for the stock market which is likely driven by likely interest rates cuts as priced in currently by the market

• The Fear & Greed index shows Fear at 35, materially less than the Neutral 46 from 1 month ago, while note that 1 year ago in the 2022 bear market we were at the 21 Extreme Fear level

• Consumer Sentiment and the S&P 500 dance together: after the 2022 bear market (biggest since 2007-2009 GFC), recovering more and more

• S&P 500 companies themselves via earnings calls narrative

2022 worries are fading for Corporate America

And the ‘R’ word: fewer & fewer citing ‘recession’ for the 4th straight quarter

👉 Seasonality tells us we are behind the next move higher

• Quarterly wise, since 1985 we have a 6.1% return in Q4; personally, I expect less given we already had a great year this year

• Daily/Monthly wise, it points out up as well

👉 Volatility wise:

• 2023 stock market rally caused VIX (indicator of market uncertainty) to fall since June to its lowest level in more than 3 years (since January 2020)

• recent spike to 17.2 as we cooled off a bit, but still below 19.6 average since 1990

📊 Technical Analysis: Short Term & Long Term

Short Term:

• once we broke out of the major resistance level (red) & the 200-day MA, we did exit the 2022 bear market and headed up nicely via the trending channel

• channel resistance level broken recently with the next support at the 200-day MA

• however, the RSI at 34 is signalling oversold conditions as it signalled also before local bottoms, hence pointing to a likely bounce back going into the year end

Complementary with an even shorter time frame, specifically from July 2022:

• trendline (black line) from the October 2022 lows is the support level

• tested for the 2nd time recently, only to bounce back from in the recent days which was also signalled by the RSI that reached oversold territories

• hence, still a support level and in case broken, the 200-day MA is the next one

• the 50-day MA (blue) is the resistance level here should the 2023 rally continue

Long Term:

• after the recent drop still above the 50 & 100-week moving averages which are now support levels going forward

• RSI in oversold territory at the 33 level which often signals a bounce back

📊 Special & Alternative Metrics

👉 S&P 500 EPS to be boosted for the next 20 years by +0.5% in annual growth driven by widespread AI adoption (0.5% seems not a lot, but CAGR aka compounded)

👉 S&P 500 set to triple to 14,000 by 2034 via the generational cycles:

• current 16-18 year cycle likely to peak around 2023

• 3x might sound ridiculously high? It is highish but not something bombastic and that is because: a) reaching 14,000 would imply around 11% annualised returns which is not that uncommon b) not too long ago in 2010 the S&P 500 was at 1,000

👉 How is the S&P 500 dealing with the high & fast rising rates environment?

• debt service burden is extremely light

• strong Corporate America is also a reason for why the most anticipated recession did not happen

Complementary angle to answer, ‘how comes rates are not impacting S&P 500?’

• almost half of the S&P 500 is set to mature AFTER 2030

• hence, rate hikes have had not much of an impact on their interest expense so far

• also, many of the S&P 500 companies have big pricing power etc

S&P 500 labour costs across the 11 sectors:

• At the aggregate S&P 500 index level, labour costs equal 12% of revenues

• At the stock level, they equate to 13% of revenues for the median constituent

👉 The Power of Dividends in the S&P 500:

Dividends contributed almost 30% to the 10.4% annual total returns of the S&P 500 over the long run. Some further key notes:

• In the 1970s, a decade characterized by high inflation and weak economic growth, dividends made up 70% of total returns

• The 1990s—the decade of the dot-com bubble—had the lowest contribution from dividends of just 15%

• The 2000s was the only decade with negative total returns: the dividend returns of nearly 2% provided a cushion to offset negative price returns driven by the bursting of the dot-com bubble and the Global Financial Crisis

S&P 500 distance from a 52-week high (green) and recession periods (grey):

• 20% drops (grey horizontal line) do not happen often outside of recessions

👍 Bonus Charts 👍

👉 interest rates a main talking point, S&P 500 (green) & US FED interest rates (red):

• we went from 0% to 5%+ interest rates in no time = 2022 FED with the fastest interest rates hiking cycle in 4 decades, yet despite that outlier, stocks still +2.86%

• stocks as a (natural) hedge to interest rates! Not the first time, nor the last …

👉 How does the S&P 500 perform around final interest rate hikes which we should have sooner rather than later? There you go:

👉 ‘AI’ mentions on earnings call rose sharply in the most recent quarter

👉 Top 5 stocks contribution by year since 2010:

• Apple running the show

• Big Tech domination present in the last years

This research is NOT behind a paywall & there are NO pesky ads floating around.

Did you enjoy this extensive research by finding it interesting, saving you time & getting valuable insights? Now some of you asked how can one support me which is really kind of you 🤗. Therefore, it would be great & highly appreciated if you would support an independent investment researcher for the ‘Maverick-esque’ ongoing & future research. A donation or a tip to support my work can be done via the following:

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Thank you & have a great day!

Mav

as Q1 2023 earnings season is over and Q2 season kicked off this week, it’s the perfect time for the 2nd edition of the ‘Maverick Valuations’ report covering USA, precisely the big 3: Dow Jones, Nasdaq 100 and the S&P 500 indices (Edition 1 here). Namely, 30 + 100 + 500 = 630 stocks. How? Via Sleek Visuals & Analytics because they say 1,000 words. This edition comes with improvements as I managed to secure more data and create special new visuals. Research is NOT behind a paywall & no pesky ads around.

This report is unique, hence quite ‘Maverick-esque’ as I tried to find it done & served somewhere else (comfy, no?), be it by banks, overall media, or independent investment researchers like myself. I was naturally willing to pay for a good and regular service straight to my inbox, yet none, but if you find similar somewhere, please let me know. Therefore, I decided to create it and plan to further improve it as we move forward.

1-click to subscribe if you aren’t yet receiving my research & sharing this around.

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Report structure = the big 3 stock indices + bonus:

📊 Dow Jones … aka ‘The Dow’ 📊

📊 Nasdaq 100 … aka ‘Tech’ 📊

📊 S&P 500 … aka ‘The Market’ 📊

= 30 + 100 + 500 = 630 stocks via sleek visuals

🏦 Bonus Charts 🏦

What are the various likely use cases provided by this report & visual analytics? Research for market leaders & laggards, likely un/warranted cheap or expensive stocks, peers analysis, stock screener, outliers, positive or negative momentum, relative strength, full equity research on single stocks & general market assessment.

My favorite use cases:

• finding future winners via further deep dives / full equity research

• finding stocks that did well across past tough times, hence resilient winners … which are likely also going forward to be future winners 

• finding ‘Pick & Shovel’ businesses that span across industries with many use cases which can make tick 2 boxes in the same time: limited downside risk though still keeping good potential upside

Great to have at hand at least 8 times per year: before & after each of the 4 quarterly earnings. An overall yearly recap is also very interesting. Let’s see now after Q1 2023 earnings & usefully compare going forward with the future editions. Check your stocks & the outliers in the scatterplots, it can get interesting & food for thought.

To start, the 2023 and 10 years Total Returns & CAGR of the big 3 indices: sentiment is very positive, risk appetite is on and we have a new bull market.

📊 Dow Jones … aka ‘The Dow’ 📊

Let’s start with the Dow Jones Industrial Average (DJIA). Created in 1896, is one of the oldest & most widely recognized stock market indices in the world & and is made up of 30 blue-chip stocks that are considered leaders in their respective industries.

9 visuals total - 1 for sector breakdown, 2 price/performance views, 6 on valuations:

• Sectors Breakdown to begin with:

Performance:

• Price action: 2023 YTD Winners & Rebounders from their 52-week low

• Price action: stocks Above their 52-week Lows & Below their 52-week Highs

Valuation:

• P/S multiple with Revenue growth (next year estimates) for a ‘Top-line’ view. Interpretation: Forward P/S multiple the stock is trading at for the given level of estimated Sales growth

• The percentile of each stock’s forward P/S ratio vs their 10-year history coupled with 2023 total returns (a Maverick-esque visual which you do not see around)

• P/E multiple with Earnings/EPS growth (next year estimates), a ‘Bottom-line’ view:

  Interpretation: Forward P/E multiple the stock is trading at for the given level of estimated Earnings/EPS growth

• The percentile of each stock’s forward P/E ratio vs their 10-year history coupled with 2023 total returns (a Maverick-esque visual which you do not see around)

• P/FCF multiple with FCF/Share (last twelve months) for a ‘Cash Flow’ view.

  Interpretation: P/FCF multiple the stock is trading at for the given level of FCF/Share

• The percentile of each stock’s P/FCF ratio vs their 10-year history coupled with 2023 total returns (a Maverick-esque visual which you do not see around)

📊 Nasdaq 100 … aka ‘Tech’ 📊

And the Nasdaq 100 because Tech is Tech. Created in 1985, it tracks the performance of the 100 largest non-financial companies listed on the Nasdaq exchange by being heavily weighted towards technology & growth-oriented companies.

9 visuals total - 1 for sector breakdown, 2 price/performance views, 6 on valuations:

• Sectors Breakdown to begin with:

Performance:

• Price action: 2023 YTD Winners & Rebounders from their 52-week low

• Price action: stocks Above their 52-week Lows & Below their 52-week Highs

Valuation:

• P/S multiple with Revenue growth (next year estimates) for a ‘Top-line’ view. Interpretation: Forward P/S multiple the stock is trading at for the given level of estimated Sales growth

• The percentile of each stock’s forward P/S ratio vs their 10-year history coupled with 2023 total returns (a Maverick-esque visual which you do not see around)

• P/E multiple with Earnings/EPS growth (next year estimates), a ‘Bottom-line’ view:

  Interpretation: Forward P/E multiple the stock is trading at for the given level of estimated Earnings/EPS growth

• The percentile of each stock’s forward P/E ratio vs their 10-year history coupled with 2023 total returns (a Maverick-esque visual which you do not see around)

• P/FCF multiple with FCF/Share (last twelve months) for a ‘Cash Flow’ view.

  Interpretation: P/FCF multiple the stock is trading at for the given level of FCF/Share

• The percentile of each stock’s P/FCF ratio vs their 10-year history coupled with 2023 total returns (a Maverick-esque visual which you do not see around)

📊 S&P 500 … aka ‘The Market’ 📊

And the mighty S&P 500 aka ‘The Market’. It was first introduced in 1957 and it has become one of the most widely followed & cited indices in the world which tracks the performance of the 500 largest publicly traded companies in the US.

38 visuals total - 2 price/performance views, 6 for index level valuation, 6 for single stocks valuations that shape the S&P 500 index, and 24 for the 11 sectors breakdown.

Performance:

• Price action: 2023 YTD Winners & Rebounders from their 52-week low

• Price action: stocks Above their 52-week Lows & Below their 52-week Highs

  Tech, AI, semiconductors and consumer discretionary are leading and hot, while energy, cruises & travel cooled off in the last year

Valuation at the index level:

• S&P 500 forward EPS & price - price decoupled strongly between 2020-2021, 2022 brought a bear market which made price & EPS be aligned again while these days price & EPS are again slightly disconnected … to be followed if this continues as it might a good sign that the S&P 500 is overvalued on the short term

• S&P 500 forward P/E ratio with 5 & 10-year averages: forward 12-month P/E at 18.9x which is above the 5-year average of 18.6x & above the 10-year 17.4x average

• S&P 500 current 10-year PE (CAPE) ratio: at 30.3x it is 50% above the long term historic trend CAPE of 20.2x, or approximately 1.3 standard deviations above trend, hence considered Overvalued.

More info for chart understanding and interpretation: CAPE ratio data series with the y-axis as baseline 0 at the average CAPE ratio value of 20.2x with horizontal bands representing standard deviations from that average

• S&P 500 valuation relative to Interest Rates: relative to a normal interest rates environment, the US stock market is Fairly Valued. Further info for rationale:

Interest Rates overview via the U.S. government bond yields 1y 2y 3y 5y 10y 30y with a 20-year lookback period:

• 3 hiking cycles in 20 years: not the 1st one nor the last one

• currently way above the 2015-2019 period and around the 2004-2009 cycle

Background on the valuation model: it is a sum of US Treasury interest rates relative to historical average (red) & the S&P500 price relative to its own exponential trend line (blue). The two relative performance indicators for interest rates (red) & stocks (blue) have been combined, showing a composite value in purple.

Interpretation: as of July 7, 2023, the 10Y Treasury bond rate was 4.06%, which is 0.61 standard deviations below normal. Likewise, the S&P500 index value of $4,399 is 0.9 standard deviations above its own respective trendline. Summing the two together, this gives a composite value of 0.66 standard deviations above normal, indicating that stocks are currently Fairly Valued.

• Mean-Reversion valuation: S&P 500 is currently 1.3 standard deviations above its historical trend line, suggesting the market is currently Overvalued.

• Last but not least, the Buffett Indicator at 1.5 standard deviations above the trend value (129%) is indicating Overvaluation.

Background on the valuation model: the Buffett Indicator expresses the value of the US stock market in terms of the size of the US economy. That is the Aggregate US Market Value = $46.79 trillion divided by the Annualized GDP = $26.71 trillion, hence resulting to 175% which is 45.82% (or 1.5 standard deviations) above the historical trend line, suggesting that the stock market is Overvalued relative to GDP.

Valuation for the Single Stocks that shape the S&P 500 index:

Now that we looked at the index level, let’s get more granular & dive deeper by looking inside the index 500 constituents.

• P/S multiple with Revenue growth (next year estimates) for a ‘Top-line’ view. Interpretation: Forward P/S multiple the stock is trading at for the given level of estimated Sales growth