Equities November reign - SP500
Tony Sycamore November 30, 2020 12:10 AM
For equity portfolios, it’s been an incredible month. European equities have been the standout, currently up ~15%, overshadowing both our personal favourite the S&P500 (+11.25%) and the high beta Nasdaq (+10.90%).
After an equity rally of such magnitude and as bonds are set to finish the month flat there has been an expectation that asset managers who run balanced funds that consist of a 60:40 split between stocks and bonds would rebalance/reduce equity exposure into month-end.
Some of the world’s largest pension funds including the Japanese GPIF and the Norwegian Oil fund are thought to use the 60:40 asset allocation split. In all, balanced funds are thought to manage over $7tr.
Of course, asset managers don’t leave all their rebalance until the last day of the month. Rather the flows are spread out over several days. Which means that more likely than not the lion’s share of this month’s rebalance has already gone through without leaving even the faintest footprint.
When looking for reasons as to how the market has been able to absorb such sizeable selling, the answer is thought to come from the staggering amount of equity inflows following the U.S. election and the announcement of successful COVID19 vaccine trials.
Over the past three weeks, it is estimated there has been over $100bn worth of equity inflows, the largest ever amount over a three week period that only partially reverses almost two years of outflows.
Returning to the S&P 500, following its new all-time high at 3668, the S&P500 has spent the past three weeks consolidating the gains of early November.
In the process it has worked off overbought readings and providing the current period of consolidation/corrective price action extends no lower than wave equality support 3480/70 area, the uptrend is expected to resume into year-end towards 3750/3800.
Aware that a move much below 3470ish would warn that a deeper correction is underway towards the bottom of the range, 3200ish.
Source Tradingview. The figures stated areas of the 30th of November 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.