#200: A New Milestone

micksonmatch
December 13, 2024

S2N Spotlight

Today’s spotlight is the milestone of 200 newsletters.

The markets have been my passion for most of my life but my job for the last quarter of a century. Every morning around 7:30, I walk into this coffee shop trying to keep my mind as open as possible. I read a few newspapers and my emails, go through my X/Twitter feed, and load up on my beloved coffee. I then write the letter.

Writing a daily newsletter is the easy part. The harder part I have found is growing it in a very crowded space. For my readers, you have no idea how grateful I am for permitting me to intrude into your busy lives; I truly hope I have added some value and a little bit of entertainment. Yesterday was the 9-month anniversary of the newsletter and website launch. As you can see, I keep a close watch on the growth of my readership.

When you start off with a zero base, growth always looks impressive in the beginning. I have grown from one channel only, which is LinkedIn, where I have reached out to my network via messages at zero cost. I am currently halfway through a cycle of reaching out for the second time, and thereafter I won’t hassle my current network again. Sorry if you felt bullied into subscribing . I have maintained a consistent 30% daily read-through rate, which is apparently decent for a daily newsletter.

The business model I have opted for is a sponsorship one where I offer the newsletter to readers for free and sell some real estate on the newsletter and web portal. I need to publicly thank Trade Nation for being such a wonderful partner and Nick Sproule in particular for taking a chance on an old but experienced market strategist. I am naturally keen to add sponsors, so don’t be shy.

What You Can Do for Me

For those who have appreciated what I have had to share, I would be extremely grateful if you could forward a newsletter or link to the site signal2noise.news for people to subscribe.

The more I am able to grow the readership, the more chance I have got of securing sponsorships, and therefore the more chance I can sustain this business and keep it free for you, the reader. I think that it is a really fair exchange for partners.

S2N Observations

Let me start by highlighting how stunning the US stock market performance has been relative to the world. This really is reflective of the world’s true superpower. Looking at this, one wonders why one needs to MAGA. As with all things in life, its complicated.

At the end of the day, I am an old-fashioned guy, and I believe too much of a good thing is bad for you. For those who have enjoyed the incredible bull market in the US, I think we are on borrowed time for a healthy correction.

I tried in the 2 charts below to present a new idea, ignoring fundamentals and letting the time series do all the talking. Let me first describe the time series. We are looking at a rolling 2-year return of the S&P 500. We have not seen 2-year returns this high since 1999. The red dotted line is the mean at 16% for 2 years. The 2 green lines are 1 standard deviation above and below the mean.

The probability I have calculated is that if the current return is greater than 1 standard deviation above the mean, then what is the probability of the next 2 years being below the mean? The answer is 47%. I was actually expecting a much higher probability of trading below the mean, which highlights how markets tend to trend for a long time.

I wanted to check out the probability of having back-to-back 2-year returns greater than 1 standard deviation above the mean. As expected, the probability is low but not nearly as low as I suspected, which once again highlights that markets tend to trend when they get going. The probability of back-to-back banner 2-year periods is 33%.

The ECB cut rates in Europe yesterday. Here is a look at the latest yield curve.

The chart below helps paint a picture of the strength of the underlying economy and the market’s view on inflation in the Europe region. Like with art, not everyone interprets it the same way.

Producer Price inflation (PPI) was released in the US yesterday. According to my numbers, I’m not sure why my numbers are different from what the press is reporting, but my numbers are up to date. I am probably looking at a different series. My headline PPI YoY came out at 1.94%, and core at 2.48%. The numbers seem well within normal range. It will be really interesting to see if they stay here.