an tSionna {08.20.15}

Chart of the S&P 500 ETF {SPY}.  Still locked in the trading range we've seen all this year.  Right now there is of course a negative bias to the market while the gloom and doom crowd is riding herd on Wall Street.  

The bears are growling right now because there's more damage to stocks than meets the eye.  The S&P 500 is a market capitalization index which means that the most highly capitalized stocks pull a greater weight.  Apple as a bigger company means more to the index than  Whirlpool.  If we take a look at an index where all the companies in the S&P 500 carry the same weight then we see a slightly different story.  Below is a chart of the Guggenheim S&P 500 Equal Weighted ETF {RSP}.  It also shows an index mired in a trading range but this has a more pronounced downward bias since the beginning of summer.  That reflects that many stocks related to energy, commodities, industrials or companies with overseas exposure to the dollar have been having a rough go of it.  

My thoughts on what's going on and why some of this may be occurring can be read in the two posts immediately below this one.  I of course don't know what's going on in the short run.  I think stocks are in their most seasonal period of weakness and that's not helping matters.  Also it's vacation time for the Wall Street crowd so markets will be thin through the end of the month.  However,   I will end this on a longer term observation.  Right now the S&P 500 carries a dividend yield just slightly under 2%.  The 10 year US Government Treasury yields 2.10%.  The S&P 500 also in all probability has growth potential {as well as volatility} over the next 10 years.  A 10 year bond purchased at this junction will in all likelihood be under pressure when rates go up at some point and will pay you a rate of return that after taxes will likely not keep up with inflation over that time.   Stocks in general are not yet oversold by our work. Anything can happen but if history is any guide the more likely horse to bet on longer term is the one with the growth.  

Back next week.

*Long ETFs related to the S&P 500 {including RSP} in client and personal accounts.  Apple and Whirlpool are components of several ETFs we own in clients and personal accounts.  Please note that positions can change at any time and without notice to our readers.