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✍️ The S&P 500 Report: Performance, Profitability, Sentiment & More - #Ed 5 is live!
  • breaking down the S&P 500 & the 11 Sectors via Sleek Charts
  • = a unique report via data driven research and visually appealing charts that simply tell … 10,000 words!


N.B. this S&P 500 report focuses on Performance, Earnings, Profitability, Sentiment, Seasonality, Technical Analysis & More. The focus and deep dive dedicated to Valuation + Special & Alternative Metrics will be covered after separately

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maverickequityresearch.substack.com
✍️ The S&P 500 Report: Performance, Profitability, Sentiment & More - #Ed 5
Breaking down the S&P 500 & the 11 Sectors via Sleek Charts - Edition #5

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When the Bottom Falls Out
Fear is swirling.
Equities are under pressure.
When the bottom falls out of the Big Money Index, a huge opportunity is around the corner.

Wow. What a difference a week makes. We’re finally witnessing a pullback that most thought was impossible. The overarching bullish sentiment seemed to never stop.

That is, until recently. A cocktail of investor worries are weighing on stocks:

  • Interest rates are surging. The 10Y yield broke above 4.60%, a level last seen in November
  • Geopolitical uncertainty is increasing with Middle East attacks
  • And the threat of rates remaining higher for longer has traders betting that interest rate cuts will get delayed, possibly into 2025

While I could opine on each of these macro worries, today we’ll focus on MAPsignals bread and butter: Money flows.

Right now, there’s a dramatic shift in our data. In fact, we’re observing a rare BMI dump that’s only occurred a few times in recent history.

When investors stop buying stocks, there’s nowhere for prices to go but lower.

Today, we’re going to size up the new data landscape, then we’ll look to history for clues on what’s ahead.

Expect a dip before a monster rip.


It’s always good to rewind the tape. Nearly 6 weeks ago, I noted how our trusty market gauge, the Big Money Index (BMI) was declining.

Preparing our readers for a stock market dump before the pump, was not a popular topic at all at the end of February.

But as we’ve learned time and time again, supply and demand ultimately determines market direction.

When money is flowing into stocks, they rise. When money comes out, they drop.

A falling BMI is our canary in the coal mine, alerting us that all is not well under the surface of the market.

While the BMI can be early and delayed, it won’t be denied. This past week saw one of the largest drops in the BMI ever:

Over the past 4 trading days, the BMI fell from 69% to 57.1% this morning. That’s a monumental collapse of 11.9%.

When the bottom falls out of the Big Money Index, it can only mean that buyers have gone on strike and sellers are taking over.

Below reveals this beautifully. The last few days reveal the least amount of buying in 2024. Also to note is we’re witnessing the most selling since October:

While the selloff is well underway and a lot of destruction has already taken place, it’s important to note where the outflows are occurring.

Interest rate sensitive groups like Real Estate, Biotech, and Clean Energy are the pain points. As global rates surge, these capital-intensive groups have suffered.

Does that mean the coast is clear? NO

As I mentioned to our members on Monday, we have yet to see leadership quality stocks get sold. In other words, this selloff is lacking one element to give us a strong “buy the dip” signal: Capitulation.

Capitulation is broad-based selling that hits all areas…even the great stocks. Those golden hour moments typically create an excellent time to shop for value opportunities.

Based on history, we are likely to see a bit more downside before a monster rally.

Check this out. Going back to 2014, I isolated all similar free-falling BMI periods that did not see capitulation. I found 15 discrete instances.

In the following 2-weeks, negative average returns were seen in both large and small-cap stocks.

Notably, the S&P 500 and S&P Small Cap 600 each fell 1.3% and 1.7% respectively the following week, indicating capitulation should come soon.

That’s the bad news.

The great news is these quick dips often offer a window of opportunity for the prepared. Three months later the S&P 500 jumps 3.3% and even better small-caps climb 4.1%:

This is why having reliable data is paramount in these trying times.

When the bottom falls out of the Big Money Index, don’t run for the hills. Instead, start prepping your buy list.

Capitulation is likely around the corner. That’ll be the green light that stocks are ready to bounce.
Trying times are buying times.

Let’s wrap up.

Here’s the bottom line: Markets are in a downtrend. Our Big Money Index has collapsed at a rate rarely seen in the last 10 years.

Whenever we’ve observed similar action, the next 2-weeks are volatile with both large and small-caps in red.

But don’t fret. A monster rally follows 2-months later.

We’re preparing to buy the dip… and ride the rip.

That’s the message we’re telling our members…a recipe that has worked countless times in the past.

We’re waiting for the capitulation signal to fire. Then we’ll go shopping for outlier stocks on sale.
That’s how you win.

Right now is a great time to join MAPsignals if you haven’t already. If you’re a serious investor, money manager or Registered Investment Advisor (RIA), get started with a MAP PRO subscription.

These windows of opportunity rarely come along.

You just need a MAP to guide you.
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MAPsignals
Solutions - MAPsignals
MAPsignals’ volume and price analysis tools enable investors to identify unusually large trading activities around individual stocks and ETFs. This allows traders and investors to move beyond sentiment with a more precise, predictive, and measured data analysis tool that MAPs the signals being delivered by the market’s biggest players.MAPsignals capabilities include: Read more »

The Millennial Wealth Conundrum: Exploring the Stark Contrast Between the Top 10% and the Average
The gap between the rich and poor is growing in the United States. This topic mostly concerns the wealth gap between the Baby Boomer and Millennial generations. However, this gap looks different when you compare the baby boomer generation to the millennial generation. The wealthiest baby boomers are richer than the average baby boomer. But the gap is even bigger for millennials - the richest millennials are way wealthier than the typical millennial. This essay will explore why the wealth gap is so much larger within the millennial generation compared to the baby boomers.

When you compare the millennials vs baby boomers discourse, you’ll find the discourse to center around issues with translating their income into home ownership, having to worry less about retirement due to access to pensions, not having student debt, and being able to buy investments at a time when valuations were lower.

The issue with valuations is a bigger deal than many think. When someone invests in an asset, the valuation metrics determine whether someone is getting a great deal on their purchase. As many will say, riches are made when people are buying assets for cheap, and that usually happens in recessionary times. For the Boomers, they got to buy assets for cheap during the 1970s and early 1980s when the US economy was in turmoil. For Gen Xers, they had the opportunity to buy assets for cheap during the 2008 financial crisis. Millennials were supposed to have the COVID crisis be their opportunity to buy assets for cheap, but the actions of both the federal government and the Federal Reserve made the dip buying opportunity small, and asset prices went from being less expensive to super expensive.

With millennials being stuck with a lack of opportunity to buy assets for cheap, it’s understandable why millennials have a harder time translating their incomes into homeownership and have more anxiety about retirement. Looking at the chart below by the Financial Times, we can understand why people are concerned with the wealth gap between the average boomer and the average millennial. But when you compare the top 10% of millennials and the top 10% of boomers and compare the gap between their average peers, we will find that the wealth gap is larger among the millennial generation.

Learn more about the wealth gap conundrum between the top 10% of millennials and the average millennial in this article: https://dissectingthemarkets.substack.com/p/the-millennial-wealth-conundrum-exploring
dissectingthemarkets.substack.com
The Millennial Wealth Conundrum: Exploring the Stark Contrast Between the Top 10% and the Average
Exploring the Striking Contrast Between the Haves and Have-Nots Within the Millennial Cohort

The US Dollar is better at holding its value than people realize
This article will change the way you see the US Dollar as a store of value

I give credit to the crypto maximalists and gold bugs for pointing out that fiat currencies are not perfect. But when accounting for the interest generated, they prove to be remarkably resilient stores of value. Gold, crypto, and other alternative assets have their place, but the narrative that they are vastly superior to the dollar as a long-term store of value is simply not supported by historical data.

I credit the zero-interest rate environment for sparking this discussion. Before the era of zero interest rates, people got a good rate of return on their savings accounts and because of this, they did not worry about their money getting eroded by inflation. Because of the zero-interest rate environment, households got essentially nothing on their savings and meanwhile, prices for goods kept going higher and higher.

When interest rates start to rebound higher and households start getting better returns on their savings accounts, I’m curious to see if more people will still think the dollar is a bad store of value.

Learn more on why the US Dollar is a better store of value than what the common opinion of it is in this article: https://dissectingthemarkets.substack.com/p/the-us-dollar-is-better-at-holding
dissectingthemarkets.substack.com
The US Dollar is better at holding its value than people realize
This article will change the way you see the US Dollar as a store of value

Europe is an economic miracle
Just as Cinderella was ultimately recognized for her inner worth and abilities, Europe deserves more credit and appreciation for its own economic "transformation"

Since the Russian invasion of Ukraine, the economic and financial community has been bearish on the European economy. They’ve been pointing out all the flaws it has, the disastrous policymaking, and how the US has been stealing all the factories from Europe. While there is truth in the issues that are pointed out, Europe has been able to grow despite everything. Europeans are living better lives today than they were back in 2006.

All media commentary on Europe stagnating economically compared to the US has all been based on GDP numbers indexed in USD. As you can see in the image below, when comparing the US and European GDP per capita, you’ll find that the US has continued to grow despite the 2008 financial crisis while the European economies haven’t recovered from the same crisis. That’s because the numbers are based on dollars, which have appreciated considerably when compared to the Euro.

Learn more about the European economic miracle here: https://dissectingthemarkets.substack.com/p/europe-is-an-economic-miracle
dissectingthemarkets.substack.com
Europe is an economic miracle
Just as Cinderella was ultimately recognized for her inner worth and abilities, Europe deserves more credit and appreciation for its own economic "transformation"

What about the 12% of simulations that show the US debt-to-GDP ratio is on a sustainable path?
The Congressional Budget Office projects the US debt-to-GDP ratio to grow from 97% in 2023 to 116% by 2034. For perspective, the US debt-to-GDP ratio during World War 2 was 116%, the highest debt-to-GDP ratio that the US has experienced. While the chart below is from 2012, add the tax cuts, the new wars that occurred, and the pandemic and the chart will look worse.

Since forecasting the US debt-to-GDP ratio comes with many variables, Bloomberg Economics ran a million simulations to predict the likelihood that this ratio will increase. As Bloomberg noted, “[i]n 88% of the simulations, the results show the debt-to-GDP ratio is on an unsustainable path - defined as an increase over the next decade.” From that, I wondered why 12% of the simulations showed the debt-to-GDP ratio on a sustainable path.

You can learn about the 12% of simulations that show how the US debt-to-GDP ratio is on a sustainable path in my Substack article in the link below:

dissectingthemarkets.substack.com
What about the 12% of simulations that show the US debt-to-GDP ratio is on a sustainable path?
Unsustainable path means an increase in the US debt-to-GDP ratio, according to Bloomberg Economics

Monster Beverage: A Beast Unleashed

Note: Today’s write-up on Monster Beverage continues the discussion from last week on Celsius, as well as the most recent update on Fever-Tree.

In the late 1990’s, Rodney Sacks and Hilton Schlosberg were searching for Hansen Natural’s next leg of growth. They had purchased the company in 1992 for $14.5 million, but Hansen Natural was still looking for “a real point of differentiation” in ready to drink (RTD) beverages. Their most recent attempt was an energy drink, Hansen’s Energy, that hit the U.S. market in 1997 (after focusing on Europe for a decade, Red Bull also entered the U.S. market in 1997). That effort ultimately paved the way for the April 2002 launch of Monster Energy Drinks, which Hansen sold in 16-ounce cans for roughly the same price as the 8.4-ounce Red Bull offering. (A strategy reminiscent of Pepsi’s “twice as much for a nickel” advertising campaign from the 1930’s.)

From a business perspective, the beast had been unleashed: by 2012, annual revenues had crossed $2 billion - up >20x from a decade earlier (Hansen Natural would change its name to Monster Beverage in 2012).

This success didn’t go unnoticed; as discussed in the Celsius write-up, Monster’s distribution in the early 2010’s was handled by a combination of Coca-Cola’s network and Anheuser-Busch wholesalers. That lasted until a momentous 2014 announcement: through a strategic partnership, Coca-Cola would contribute its energy drink brands (NOS, Full Throttle, etc.) and pay $2.15 billion in exchange for a 16.7% equity stake in Monster, which would be the beverage giant’s “exclusive energy play” (as a result of subsequent share repurchases, Coca-Cola’s stake is now up to 19.6%). In addition, the Coca-Cola system would become Monster’s global distribution partner; as Sacks said in 2017, “The key for us was International distribution… To truly be an International brand, we needed a distribution partner with their reach.”

Read the remainder of the MNST write-up at the TSOH Investment Research Service

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thescienceofhitting.com
Monster: A Beast Unleashed
Energy drinks and ~200,000% stock price appreciation

4/12/24 Port Performance
-1.76% decline for the day.
-1.02% decline for the week.
-2.03% decline for MTD.
+14.50 gain for YTD.
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Commonstock is a social network that amplifies the knowledge of the best investors, verified by actual track records for signal over noise. Community members can link their existing brokerage accounts and share their real time portfolio, performance and trades (by percent only, dollar amounts never shared). Commonstock is not a brokerage, but a social layer on top of existing brokerages helping to create more engaged and informed investors.
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