God Jul
Macro Perspectives
Yesterday, we talked about the only four data points in financial market history (dating back to 1929) where both bond market investors and stock market investors were left with losses on the year.Â
It happened in 1931, 1941, 1969 and 2018. And it will happen this year.
We also looked at the performance of each of these major asset classes for the year AFTER having experienced this dual negative return. Today, let's also take a look at the valuation on stocks following these historically uncommon dual negative return years…
After a down 44% year in stocks in 1931, that left the P/E on the S&P 500 at 14 by year end (down from 17 a year prior). In 1932, stocks followed a down year, with a down year (down 9%).
After a down 13% year in stocks in 1941, that left the P/E on the S&P 500 at 8 by year end (down from 10 a year prior). In 1942, stocks followed a down year, with an up year (up 19%).
After a down 8% year in stocks in 1969, that left the P/E on the S&P 500 at 16 by year end (down from 18 a year prior). In 1970, stocks followed a down year, with an up year (up 4%).
After a down 4% year in stocks in 2018, that left the P/E on the S&P 500 at 20 by year end (down from 25 a year prior). In 2019, stocks followed a down year, with an up year (up 31%).
Notably, both the end of 1969 and the end of 2018 were peaks in rate tightening cycles.
Fast forward to 2022: Stocks are down close to 20%. We will head into 2023 with a trailing twelve month P/E of 19. That's down from 29 a year ago. And we are near, if not at, the peak in the rate tightening cycle.
This will be my last Macro Perspectives note for the year.
Thank you for being a loyal reader of my daily notes. I want to extend my best wishes for a Merry Christmas and a Happy and Healthy New Year!
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Jag önskar er en riktigt god jul, ett gott nytt år och allt det bästa inför det nya året!
Alexander.
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9 Essays, 80 Pages, over 50000 Words to review the year 2022.