By Jeffrey Cohen, President and Founder, US Advanced Computing Infrastructure, Inc., Highland Park, Illinois
A consultancy and registered investment advisory firm.
These are the top forces acting on US stock prices. Overall, when these move, stock prices are moving. These are casual relationships maintained over the past one or five years against the S&P 500 Equity Index or SPY ETF. We have seen a few of them break with longer-term trends lately, which could change the trajectory of stocks.
These factors are not necessarily causes of stock market movements. They are correlated with stock market movements.
In our opinion, a few of them significantly influence stock market attractiveness for new capital, and we will highlight those in bold.
This is a continuation and evolution of our original Top 10 Stock Market Drivers story. Here are the current pressures impacting US stock prices.
We would suggest tracking these ten factors each day that you have an active investment with significant capital at risk, and to see where the market forces are leading the market (if at all).
We see many views on these metrics in the popular media, so we publish BETA values where possible so you can see where the correlations historically have been, not where they should or could be.
Factors that put pressure on stock prices when they move.
- Volatility of stock prices: Historical stock price volatility for all stocks that pass data validation (today it is 3,010 US-listed common stocks) is lower than we have seen in years, at 4.00 x 10–5 (our proprietary calculation) on Monday, Sept 25, market close. The VIX, which is the price for volatility as determined by futures and options pricing, has risen significantly over the past few weeks, from 13.xx to 18.xx. So, we have a disconnect where historical volatility is lower, and pricing for future volatility is higher. The full CBOE Volatility Index (VIX) Futures curve is now priced around 1/3 higher than a week ago. The VIXY ETF, ProShares VIX Short-Term Futures ETF, has a BETA of -2.0, which is significantly and materially negative casual relationship.
- Share prices falling (momentum): Choppy without direction. Stocks currently flat in a trading range. Sept 25: Total equity market capitalization of $50.0T vs. $49.9T on Sept 21, and the Wednesday before was $51.4T…