Unexpectedly Intriguing!
March 25, 2013

Aside from relatively minor noise in the market, the S&P 500 is continuing to behave as expected.

To underscore that point, let's revisit the "what if" game we started playing three weeks ago, following the Italian election fiasco noise event, when the S&P 500 had closed the previous Friday, 1 March 2013 with a value of 1518.20.

Playing "what if", we asked the question: "What if investors continue to focus on 2013-Q2 in setting today's stock prices and the change in the expected growth rate of dividends for that quarter stays constant with where it is today. How much would the value of the S&P 500 have to change on average per trading day to converge with that level by 21 March 2013 - the last day we have shown on our chart?"

We came up with an average increase of 2.75 points per trading day.

Spanning 14 trading days from 4 March 2013 through 21 March 2013, the S&P 500 would have to have risen to a level of 1556.70 before the end of that period for our "what if" game to hold true, a 38.5 point gain from the Friday, 1 March 2013 closing value of 1518.20 over those three weeks of calendar time.

The S&P 500 did just that on Wednesday, 20 March 2013, when the index closed at a value of 1558.71.

On Thursday, 21 March 2013, the market responded to a new noise event, with the S&P 500 pacing the reaction of global markets to uncertainty related to the EU's bailout of Cyprus' banks that day. But, that noise event was short-lived and the market recovered to close at 1556.89 on Friday, 22 March 2013.

So, aside from relatively minor noise in the market, the S&P 500 is continuing to behave as expected. Here is where the market stands at present:

Change in Growth Rates of Expected Future Trailing Year Dividends per Share and S&P 500 Stock Prices, 25 March 2013

This will be the last updated version of this chart that we'll be featuring for some time.

In the meantime though, here are three thoughts to consider for this week. First, not all noise events have a negative effect on stock prices. Second, following up a seemingly random comment of ours last week, you don't have to wait for a 150 point decline in the value of the S&P 500 for a clear sell signal. There are other, less clear ones that you might also consider!

And third, yes, what we've just demonstrated over the last three weeks is nearly impossible. We just have a knack for being able to execute that sort of thing.

We'll explain more of that second thought later this week....

Update 29 March 2013: Make that "sometime next week". We're going to take a day to savor the S&P 500's new all-time high and enjoy the holiday weekend!

Labels: , ,

About Political Calculations



blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Applications

This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button

JavaScript

The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Archives
Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.