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7 charts from the past week that tell an interesting story in markets and investing…
1) Volatility Returns
The Volatility Index ($VIX) spiked 54% on Friday, its 4th largest 1-day increase in history (note: $VIX data goes back to 1990).
The $VIX ended the week at 28.62, its highest level since February.
Here’s a look at how the S&P 500 has performed following prior volatility spikes…
2) How Common Are 1, 2, 3% Declines?
The S&P 500 fell 2.3% on Friday, its 5th 2-3% decline of the year. There has yet to be a daily decline of more than 3% in 2021. In 2020 we saw that happen 16 times.
This has still been a relatively calm year for U.S. equities, with a maximum drawdown of only 5.2% (S&P 500 on a closing basis). The historical average intra-year drawdown since 1928: -16.3%.
3) Crude Oil Crushed
Crude Oil suffered its 9th worst day ever on Friday, falling 13.1%. Fears over the latest covid-19 variant (Omicron) was said to be the impetus for the decline.
Travel-related stocks were impacted as well, with the global airlines ETF ($JETS) hitting a 52-week low, down over 30% from its high in March.
4) The Fed’s Preferred Measure of Inflation
The Fed’s “preferred” measure of inflation, core PCE, has moved up to 4.1%. That’s the highest level we’ve seen since 1991.
5) New Home Prices Surge
Speaking of inflation, New Home Prices hit another new high in October, increasing 18% over the last year. 10 years ago the median new home in the US sold for $225k. Today that’s moved all the way up to $408k.
6) Lowest Real Yields Since 1974
After adjusting for inflation, U.S. bond investors have almost never been compensated less than they are today. With the exception of a single month back in 1974, today’s real 10-year yield of -4.7% is the lowest we’ve ever seen. The 6.2% inflation rate (highest in 31 years) caught many investors by surprise, but perhaps more surprising has been the lack of a meaningful rise in interest rates, with the 10-year treasury yield sitting at only 1.5%.
7) 52-Year Low in Jobless Claims
US jobless claims hit a 52-year low this week, falling below 200k for the first time since 1969. The US population in 1969 was 203 million. Today it’s 333 million. If you adjust for this population increase, jobless claims have never been lower than they are today.
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And that’s it for this week. Thanks for reading.
Hope you all had a great Thanksgiving!
-Charlie
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