S2N Spotlight
I put money on it that you never thought that the S&P 600 Small Cap index as of yesterday is in its second longest drawdown in history—1067 days. With the S&P 500 making new highs quicker than I cut my hair.
I couldn’t resist taking a peek at the Hang Seng Index, and bingo, it too is suffering its second longest drawdown in history. However, this is 2447 days long. It is no wonder you never read about billionaire stock investors in this region.
S2N Observations
I wanted to carry on the theme of the small caps and their relative performance with the main index. In the chart below, I mark in red where the rolling number of weeks in a year are above 67%, or 35 in number. We are clearly in positive territory.
The small caps are trailing here as well.
I slip the Hang Seng in for good measure.
I thought it would be interesting to look at gold, as it too is making new all-time highs. Well, well, what do we have here? Very interesting. If gold is about to continue its secular upward trend from the early 2000’s when central bankers turned their back on inflation it looks like it has plenty of upside.
Speaking of inflation, yesterday the BLS released the September CPI numbers. I personally don’t like to get involved in the dissecting of each component. I try and keep it simple and look at the trend.
The trend has been that it is coming down. It is below its very long term average. It is substantially above the Fed’s 2% target rate.
It is hard to see in such a dense chart but month on month it was the second successive increase.
The bond markets long term inflation expectations are shown below. The last month has seen an uptick in expectations.
Performance Review
For those who are new to the letter, the shading is Z-Score adjusted so that only moves bigger than usual for the symbol are highlighted.