JFK-Trump S&P Analog 2.0

MarketWatch giving us some nice props in their excellent piece today on the back of the Zero Hedge post about our JFK-Trump S&P analog, which convinced us last February that global stocks had entered in a bear market and would soon “roll-over hard.”

Back in April, the Global Macro Monitor blog, which was the first to draw the comparison, warned in an update that, if the trend in the chart below were to continue, the S&P 500 SPX, -0.34%  would soon take a big hit.

It may have taken a bit longer than expected, but the selling sure came, and the charts are now in lockstep. In fact, Wall Street has taken notice.

In a note shared on the Zero Hedge blog over the weekend, Goldman GS, +1.38% strategist David Kostin chimed in about how the current retreat, driven by policy concerns, mirrors the “Kennedy Slide” of 1962, which came against the backdrop of the Cuban Missile Crisis, when Kennedy demanded Soviet-leader Nikita Khrushchev remove nuclear-missile installations in Cuba…

Global Macro Monitor gave several reasons why the analog works, including geopolitical jitters, extreme valuations, inflation woes, etc. But the blogger pointed to one compelling stat, in particular: The S&P’s big move in a short period of time after each election: JFK — 30.1%, 285 days; Trump — 34.8%, 306 days.”

“Bear markets always follow bull markets and the bigger the prior move in a compressed time frame, the harder the fall,” he said. “Bear markets look for catalysts to sell, but the underlying vulnerability remains — valuation and longer-term overbought conditions.” — MarketWach,  January 14

We iced the analog after a ten percent divergence between the two S&Ps.

We updated it today for your review.

The JFK S&P bottomed in June of 1962, rallied and then retested the low in October as bear markets often do, putting in the final bottom the day after the Russians stood down during the Cuban missile crisis.

Analogs are just another tool in the quiver to guide us through the foggy and uncertain future, just as technical analysis, market gurus, fundamental reports, and preachers, who speak with conviction, do.

Don’t bet the ranch or your life on any of the above.

Eerily, in our post, 2019’s Most Mispriced Tail Events, we list as number one:  Trump won’t finish his third year in office.

1. Trump Leaves Office By Year-End
There is only one thing Trump likes more than power – money.  As his legal troubles grow exponentially in 2019, the president has an epiphany that he could lose all his wealth.  He cuts a Spiro Agnew-like deal and resigns from office in return for leniency.   The markets rally into the announcement but Trump doesn’t go easy and dog whistles to his base as he hits the exit.  The U.S. experiences a period of political and social instability.   Stocks sell-off hard. 
Global Macro Monitor, January 6

Stay tuned.



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