S&P 500: Seasonal Correction

Hey everyone and thanks for jumping back Into the equity verse today we're going To talk about the S P 500 and we're Going to be discussing this seasonal Correction we have seen in August and September of the pre-election year and How it compares to Prior pre-election Years and of course we'll discuss other Things like the bond market and and Maybe we'll mention crypto a little bit As well if you guys like the content Make sure you subscribe to the channel Give the video a thumbs up and also Check out the sale on into the crypto Various premium at into the Cryptoverse.com that sell is going to End at the end of the month let's go Ahead and jump in we've seen a fairly Sizable correction in the S P 500 over The last couple of months this is Actually a correction that we said was Probably going to happen just simply Based you know just simply based on the Context of History if you're not Familiar with what I mean if you look at Prior pre-election Years you'll see that They're oftentimes is a correction in The S P 500 around this time frame right Around the 2 200-day Mark plus or minus A month or so in 2011 you can see we had A fairly sizable correction we had a Fairly sizable correction in 2015 and we Also had one in 2019 but it wasn't as Substantial but history shows that

Around that August September time frame Of pre-election years the s p tends to Get a fairly large correction now we Said this back in July of course well Before this correction was underway but The point is to say that you know while It doesn't tell you what has to happen It does tell you that hey there is a Highly High likelihood that the s p Experiences a correction in August or September especially considering that we Had such a impressive run going into the End of July right going into the summer Now what I think is worthwhile to do is To take 2023 and compare it to all prior Pre-election years going all the way Back to 1928. now when you do that you Get a chart that looks like this so the Year-to-date Roi for 2023 is this purple Line up up here and this sort of light Blue represents the average year-to-date Roi of the S P 500 For all prior pre-election years going Back for almost 100 years now what's Fascinating about this correction is That after 200 days or so just over 200 Days around 268 or maybe 269 days the The ROI of the S P 500 this year is 1.12 Meaning it's up you know about 12 off Where it opened the year but the average Return of the S P 500 at this point in All prior pre-election years going back To 1928 is 1.11x meaning about 11 off The early open at this point so while it

Has been a fairly sizable correction and Larger than a lot of the corrections we See perhaps one of the reasons the Correction has been so large is just Simply because we extended well beyond Where we normally go at this point in Prior pre-election years on average so While there have been a lot of people That that might scream to the rooftops At the bond market you know has to go up So simply because the S P 500 is going Down charts like this show you that While this has been a fairly large drop By the s p this is not necessarily Indicate that it's a that the s p is Pricing in a recession just yet remember History shows us that what normally Happens is that the bond market bottoms Out before risk assets do and at this Point you can see assets like TLT have Just continued to go lower now I have no Idea how much lower they're going to go But we also do know that oftentimes the The bond market can sort of go can Continue can continue to go lower right Up until around that fed pivot right so Once the FED starts to lower rates and Whatnot usually the bond market is sort Of taking back off to the upside it Bottoms first then sometime later on the Stock market bottoms but right now we're Seeing the bond market You know like this is the uh you know This is TLT it just continues to put in

New lows so what you would what I would Be looking for for things like the s p To figure out you know at what point Could it theoretically be a more macro Bottom is at what point does something Like TLT bottom out and start to move Back up remember once that moves back up It likely means in a in an impressive Way it likely means that the FED is is Starting to Um you know at least consider a pivot And and once a pivot occurs that doesn't Mean that risk assets have to bottom out Immediately in fact oftentimes the s p Will sell off well after a Fed pivot but The point is to say you know this is a Fairly standard correction in the S P 500 in the August the September time Frame we said going into it to expect This correction to more or less take us Back to the average you know by the end Of September But now that we're here you can see that Historically after this point in Prior Pre-election years once we get into October November the market tends to be Fairly dull on average that doesn't mean That it has to be this this time there Are examples where like in 2019 the Market just continued to go up and put In new highs just before crashing into Into a recession there's also examples Like 1987 where the market just simply Collapsed after getting you know this

Sort of this seasonal correction for you Know in in the August of September time Frame then we saw the market drop Substantially in in October but at this Point at this point this has been a Fairly standard correction by the S P 500 and I do not consider this Correction to necessarily indicate that A recession has been priced in okay If a recession were being priced in then I think the drop would likely be a lot More substantial if a recession were Being priced in then one might think That the FED is getting closer to Pivoting but if you go look at things Like say like the bond market you know The bond market isn't even expecting Rate Cuts until July of 2024. now that Might prove to be somewhat optimistic if You know the FED might not be able to Wait until July 31st to to really make Their first rate cut if they do then That would be sort of a compliment to The labor market as to how resilient it Is but at this point you know the bond Market is saying the First Rate cut is Almost a year away A lot of people are saying that this S P 500 correction you know is indicative of Recession now and while I would agree That a recession is likely what happens At the end of this business cycle there Still are a lot of factors that would Suggest that there's still a little bit

Of ways to go before some of those Recessionary signals are are a bit more Clear for instance things like initial Claims and continue claims still print Very low low levels like initial claims At this point You know have have dropped considerably Uh now at around two hundred and one Thousand do note that it it is Potentially bottoming out here in September just like it did last year you Can see that initial claims bottomed out Really that last week of September Perhaps we're going to see something Similar this time around as well so be Aware of that continued claims have also They're not really showing a recession Just yet and what I would suggest what I And again you can see over here continue Claim sort of bottomed out last September perhaps something similar will Happen again but what I would suggest is That you know by the time the labor Market really starts to show weakness Corrections by the S P 500 would likely Be much more substantial than than just Say like a a five percent correction Okay so at this point we can look at This and say all right we've had our Seasonal correction in the S P 500 There has been some softening up in the Labor market but it it doesn't Necessarily look like it has to be Indicative of a recession immediately

Although that could actually occur by The end of the year or early next year Right if the FED stays this course which I think they will That of course could push the economy Into a recession and then we could see a More significant rollover by the s p 500. now remember one of the things we Said though is that even if the s p gets A correction in Q3 and even if it goes Back up in Q4 like it did in 2019 that Doesn't necessarily mean that it's a Good thing for crypto if you remember in 2019 the s p saw a fairly sizable Correction in August and then we got Another one in September but in this Case even though the s p went on to put In new highs in late 2019 I will have You remember that Bitcoin continued its Downtrend for the rest of the year and Even you know it did go back up in early 2020 and then put in another low in March of 2020. So just remember going into August we Said likely going to see an S P 500 Correction Could be five to ten percent This correction the seasonal correction What it normally does is it pushes asset You know it pushes Bitcoin below its 20-week moving average right if you look At every single prior pre uh Pre-election year pre-halving year the You can see that Bitcoin has always

Fallen below it's 20 week estimate 21 With EMA At that time at you know at that point Every single August or September of These prior pre-halving or pre-election Years whatever you prefer and so that Has come that that has happened again That has happened once again Pre-election year correction by the S P 500 Bitcoin gets into a downtrend it Could last you know for several more Months before it's all said and done and Then it could end in a recession just Like the one last cycle did right where We had this sort of this recession low And and it did not even occur until the Having year so one of the things that I Think it's important to remember is that You know when you get Corrections like This by the s p it can often make people Think that because the s p is dropping That things like TLT have to immediately Go up but when you look at the context Of History you'll see that the current Correction by the S P 500 is actually Not that far off from what we've Historically seen in the average Pre-election years if you look at if you Look at where the year-to-date Roi is Anyways so by looking at it like that it Makes a little bit more sense why the Bond market is where it currently is the Bond market does not yet believe that The S P 500 at 4200 or 4300 is going to

Be enough to cause the FED to Pivot but If the s p continues to drop Right which it could maybe later this Year early next year if it continues to Drop then at some point the bond market Will probably say all right the fed's Likely going to come to the rescue Relatively soon and at that point you Know you can see bonds bottom and then They start to go back up the s p Continues to sell off because it takes You know several rate cuts and it takes A decent amount of time for it to filter Through to the economy just like rate Hikes take a while there's long and Variable lags rate Cuts can also take a While there's long and variable lags so Do remember that in business Cycles what We normally see is the bond market Bottoms first and then the S P 500 Bottoms after not the other way around Crypto you know could be somewhere in Between like I could see it bottoming After uh like I could see you know the Altcoin Reckoning for instance I could See it being over after bonds bottom but Maybe before the the overall stock Market bottoms if that makes sense and The reason I say that it could just be Due to the fact that crypto is more so Dependent on excess liquidity than the Stock market is and so if that's true Then the minute liquidity comes back Courtesy of you know the FED then that

Means the altcoin Reckoning could be Over it might take a little bit while a Little longer for the S P 500 to really Digest that you know that liquidity Coming back and lower rate hikes or Lower or lower interest rates but Perhaps for for things like crypto Um you know it could happen it could Happen just a bit sooner so I just Wanted to sort of do a follow-up on this On this sort of this idea of this S P 500 correction in August and September Of the pre-election Year showed that It's actually been a fairly standard Correction to get us to the typical Roi At this point in Prior auctioneers by Understanding that it kind of makes Sense why TLT hasn't really seen a Significant rebound just yet if the s p Were to continue going down very very Quickly over several more weeks then you Perhaps you could see the bond market Finally pay attention And I and I could easily see you know Things like Bitcoin and the altcoin Market as a whole staying in a downtrend For the year for the rest of the year Regardless of what the S P 500 does you Know and that's something that I think a Lot of people Um don't necessarily you know they Haven't selected at that sort of that That phase where the s p went up and and Didn't really affect the crypto Market

At all Bitcoin still went down it's kind Of like on days like today where you Know the s p is down about a person one And a half percent Bitcoin barely moved So then there also can be other days Where the s p goes up and and Bitcoin Goes down or maybe the s p barely moves And Bitcoin drops so you know sometimes People say well you know you know They're the the cryptocurrency asset Class is showing some type of Divergence Or something with respect to other asset Classes I would argue one of the reasons For that is crypto tends to move a bit More discreetly than the s p the s p can Often be more continuous in its Movements just sort of slowly going to Wherever it's going to go whereas Oftentimes Bitcoin and crypto can just Kind of hang out in a range for a long Time and then quickly move up or quickly Move down to whatever the new range is Going to be Um so just remember that crypto tends to Move a little bit more in in sort of Discrete function discrete steps whereas The s p tends to be a little bit more uh Continuous you can kind of see that like If you were to just look look at Bitcoin Uh USD the weekly chart what you'll see Here is you know just relatively boring Price action and then it just moves to The upside right boring price action They're strongly about boring price

Action and then it's a strong move down Boring price action and it could again Result in a fairly substantial move in In One Direction or the other I suspect It's more likely to be down than up just Because normally at this point Bitcoin Sort of Fades as it goes into as we get Into the latter part of the prehabbing Year but we'll have to wait and see if If this is if this is going to play out Like it normally does or or not and my Suspicion is that it will just like Going into August we said the s p is Likely going to correct it's likely Going to drop Bitcoin below the 20-week SMA and it could easily push the awkward Market into a more sustained downtrend For the rest of the year So that's where we currently stand Hopefully this has been insightful in Terms of kind of seeing where the bond Market is why it hasn't necessarily seen The strength that a lot of people were Looking for what it would take to see That strength and just remember As long as as long as the FED is not Pivoting then the s p or sorry then the The bond market Doesn't necessarily have to find a low Or at least if it's as long as it's not Like immediate if we get to the point Where it seems like it's likely going to See a rate cut in the next few weeks Then yeah at that point the bond market

Could could bottom and and could start Moving up very very quickly and then Sometime after that we would expect or At least I would expect you know risk Assets to fund whatever their final low Is going to be for some assets it could Be a lower low for some assets it could Be a double bottom for some assets it Could be a higher low it just also Depends on sort of the idiosyncratic Risk of of each individual asset the Riskier the asset is the more likely it Is to be a lower low right so like for All coins it's more likely to be you Know much lower lows uh you know for the S P 500 it could still be a lower low But as you again as you go up the risk Curve if it's a lower low from the s p Then it's going to be it's probably Going to be a much lower low for you Know for um For say like the Russell 2000 right if It's a higher low or something then then It might not be as bad for the Russell But it all depends on how far up that Risk curve you go and and the further You go up the risk curve the more likely That it would be in fact a a lower low And again you can see a lot of all coins Are already putting in lower lows you Know forget forget having to wait until A recession is priced in uh a lot of all Coins are already putting in lower lows And will likely continue to put in lower

Lows uh for for several months to come Regardless of what you know regardless Of if the s p goes back up in in the Fourth quarter or even if it stays Sideways in the fourth quarter of the Year you could still see the altcoin Market unfortunately bleed uh that's Just sort of the way it is at this point In the cycle anyways if you guys like The content make sure you subscribe give The video a thumbs up and thank you guys For tuning in we do have the sale on Into the cryptographers premium into the Crypto versus premium you can find that In the link below uh which you'll see in The pinned comment thank you guys for Tuning in I'll see you next time bye

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