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#31 S2N: Yen in a Samurai Battle

#31 S2N: Yen in a Samurai Battle

micksonmatch
March 28, 2024

In today’s issue:

Seasonality affects on the SP500
Yen in a Samurai Battle for the Ages
Update on Trumps Truth Social

Today’s Spotlight

There is a concept in finance/economics/statistics called seasonality. It means that price action displays a detectable, repeatable pattern at a certain time in the calendar. There are many different ways to measure pattern detection; some are off-the-chart complex with advanced statistical modelling. I like to keep it really simple.

In the chart above, I take the monthly returns for the SP500 since 1970, which is more than 50 years of returns, and calculate the average for each month. Let me share a few comments.

The average cumulative return for the SP500 is 14% for an average year.
The average for April is a +2% return.
Some seasonal effects have very clear reasons and become self-reinforcing, e.g., the Santa rally.
Some seasonal effects have no clear reason but still become self-reinforcing, e.g., the September effect

Do not chase seasonal effects. They are averages that took more than 50 years, in this case, to form.

If you want to take a look at how the returns are made-up, you can study the table below. The way I have presented it will show you the seasonal effects of the day of the month and the month of the year.

I will share one last seasonal. The day of the week. Tuesday’s are the best days to be in the market and Thursday’s the worst.

S2N Insights

Yen Samurai Battle for the Ages

The Japanese Yen just made a 30 year low. Yes the higher it goes the weaker the Yen is, just the way most people show it. Apparently the BOJ and government officials were telling large traders that they will intervene if it goes above 152. The ultra low interest rates worked to weaken the Yen but now that they have raised rates they were expecting the Yen’s slide to stop. The problem is the rates are still incredibly low compared to rates elsewhere in the world so the Yen is likely to remain weak. The issue now is that Japan has inflation after the decades of deflation and the economy can not handle more inflation right now. This means the BOJ will be buying Yen to try and protect it from falling but it also spells more interest rates increases in the near future.

The Truth of the Deal (update)

I already shared yesterday that Truth Social was valued above $8 billion. The stock had another big day rallying 14% so that is another billon in valuation to add to the outrageous valuation. Just in case you were wondering. The company has yet to turn a profit and generates quarterly revenue of barely $1 million.