Unexpectedly Intriguing!
01 February 2021

From time to time, the S&P 500 (Index: SPX) experiences Lévy flight events. These are periods where stock prices move by a much larger-than-typical amount, which coincide with changes in the forward time horizon of investors.

The stock market's first Lévy flight event of 2021 took place during the third week of January. Here, Netflix' (NASDAQ: NFLX) announcement they would no longer need to borrow to finance the cost of new programming prompted investors to shift their forward-looking focus outward, from 2021-Q2 to the distant future quarter of 2021-Q4. That kind of change constitutes a Lévy flight event for the stock market, which directly coincides with larger-than-typical changes in stock prices.

The final week of January 2021 saw that process play out in reverse, as investors shifted their forward-looking focus back to the nearer term future quarter of 2020-Q2 in the second Lévy flight event of the year. The latest update to the alternate futures chart shows these changes against the backdrop of the various levels dividend futures-based model projects the S&P 500 would be based upon how far into the future investors are fixing their attention in making current day investment decisions.

Alternative Futures - S&P 500 - 2021Q1 - Standard Model (m=+1.5 from 22 September 2020) - Snapshot on 29 Jan 2021

As Lévy flight events go, the recent volatility in stock prices caused by these shifts of investor time horizons has been relatively muted. While crossing the threshold of being "interesting", which we define as the S&P 500 changing in value by two percent or more at the close of trading from the previous day's closing value, the expectations for changes in the growth rate of dividends per share at the future points of time investors have focused upon aren't very different from one another, which accounts for that muted performance.

On the other hand, if investors were to suddenly focus on 2021-Q1, we would see a much larger, downward move in stock prices from their current levels, which would be driven by new information. Speaking of which, here is our rundown of the new information to which investors reacted during the last week of January 2021.

Monday, 25 January 2021
Tuesday, 26 January 2021
Wednesday, 27 January 2021
Thursday, 28 January 2021
Friday, 29 January 2021

Over at The Big Picture, Barry Ritholtz lists the week's positives and negatives he plucked from the economics and markets news streams!

In this edition of our S&P 500 chaos series, we haven't addressed the "David vs Goliath" story going on with the short squeeze of stocks like GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC). While fascinating in and of itself, the battle between retail investors and hedge funds has barely budged the bar for the S&P 500 index as a whole, which is our primary focus for this series.

Labels: ,

About Political Calculations

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

Stock Charts and News

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

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

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

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
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.