Gravitas: 100 Trading Days

July 05, 2024 | Michael Newton


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The Newton Group Insights

The folks at DataTrek did an interesting study this week. They looked at how the S&P 500 performs over rolling 100-trading day holding periods. This works out to about 5 months, so it is a reasonable timeframe to consider as we look forward to the second half of 2024. The chart below the S&P’s trailing 100-day price returns back to the start of 2010. There are some findings in this data worth highlighting. First: The S&P 500’s 100-day win rate (percent of days with gains over a 100-day holding period) since 2010 is a remarkable 80 percent. Second: Losing 100-day periods always have very specific catalysts which are noted in red in the chart.

  • The May 2010 flash crash and its aftermath took 100-day returns down to -11.4 percent in August 2010.
  • The October 2011 Greek Debt Crisis was especially difficult, with a 100-day drawdown of 17.4 pct.
  • There was another flash crash in August 2015, and 100-day returns only troughed at -9.1 pct in late September 2015.
  • The swift bear market of Q4 2018, caused by overly aggressive Fed guidance on the neutral rate of interest, saw 100-day returns trough at -15.7 pct in late December 2018.
  • March 2020’s Pandemic Crisis lows were on the 23rd of that month, the same day trailing 100-day returns hit their nadir of -25.9 pct.
  • The 2023 bear market had the longest run of negative 100-day S&P returns since 2010, from March – November and troughing in May at -17.0 pct.

I suppose the main takeaway is history says it will take a powerful negative catalyst for the S&P 500 to post a negative return between now and late November 2024. Powerful here means something truly unexpected, not modest changes to the timing of rate cuts or continued cooling in the US economy. Markets know there is some uncertainty on these issues. The same goes for US elections. For all the buzz after last week’s presidential debate, offshore wagering websites only put former President Trump’s odds of winning at 51-57 percent. The bottom line is that, if you think there’s a specific unforeseen negative catalyst ready to derail markets in the next 100 days, you will be very happy to have your portfolio managed by us given our stop loss and risk management overlay. Otherwise, I suspect US large caps should continue to generate positive returns into the end of the year. They are, after all, remarkably good at discounting uncertainty without creating undue volatility in the process.

Should you have any questions or concerns, please feel free to reach out.

Portfolio Notes

(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral

(+) Amazon (AMZN-US) On Friday, July 5th, Amazon turns 30. It has plenty to celebrate. Its market value surpassed $2 trillion for the first time, something only four other companies have achieved. The e-commerce giant has 40% of the market by revenue. It is also the world’s largest cloud-computing firm and its third-biggest advertising company. But it does come some risks. Antitrust regulators say that some of Amazon’s behavior is already anti-competitive; further integration could lead to more such claims. And it has big-tech rivals, such as Google, in the ads and e-commerce markets. Coincidentally, Jeff Bezos is set to sell nearly $5 billion worth of Amazon shares in July, following a sale of $8.5 billion in February, bringing his total offload this year to over $13.4 billion. Those are big numbers, but his riches are well-deserved in my opinion. Owned in Core, ESG+, and US Portfolios.

(~) Constellation Brands (STZ-US) reported an EPS beat in FQ1, driven by stronger than expected profitability while revenues were largely in-line with consensus. The business continued to be led by the beer segment, which drove solid revenue growth and margin expansion. Meanwhile, the Wine and Spirits business continues to lag, with sales and operating margins both missing consensus expectations. We were also encouraged by the fact that management reiterated its F25 guidance despite signs of incremental headwinds on the US consumer, which is a testament to the company's strong execution. With the shares trading at 18x forward P/E vs. its 20x historical average, we would continue to be buyers at current levels. Owned in Core and ESG+ Portfolios.

(+) Humacyte (HUMA-US) stock rallied almost 20% this on news that the company has received FDA regenerative medicine advanced therapy, or RMAT, designation for its product candidate Acellular Tissue Engineered Vessel, or ATEV, for the treatment of peripheral artery disease. The biotech company noted it was the third RMAT designation for the product, formerly known as Human Acellular Vessel. The product also has RMAT designations for vascular trauma repair and arteriovenous access in hemodialysis. The FDA also cleared the company’s application to begin clinical testing of the product for peripheral artery disease. Owned in Opportunity Portfolio.

(+) Tesla (TSLA-US) In the past month Tesla shares are up over 40%. The electric vehicle company recently reported stronger-than-expected second-quarter deliveries. The Elon Musk-led company delivered 443,956 vehicles. The figure showed a 4.8% decline from a year ago but was 14.8% above first-quarter numbers. Tesla has been the talk of the town for much of the first half of 2024, but not for a good reason. The electric vehicle (EV) maker had lagged its big-tech peers, who were seemingly making new highs on a daily basis. However, some suggest that the tide has finally turned after its second-quarter production and deliveries report topped expectations. Owned in ESG+ Portfolio.

Weekend Reading

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