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Zdjęcie autoraJarosław Jamka

Risk-off update

The third week of S&P500 declines is behind us (Figure 1). Last week, the S&P500 fell 3.05%.



From March 28, i.e. ATH, the S&P500 is already down 5.46% (Figure 2).



Interestingly, in the previous risk-off case (from July 31 to October 27, 2023), the S&P500 was down by 4.64% after the third week - which is quite similar. Additionally, the fourth and fifth weeks of the 2023 correction were positive (see Figure 1, bottom panel).


The correction is more of a technical nature, aka mean-reversion, i.e. what previously increased significantly is now falling more strongly (Big-tech, Mag7, Japanese shares).


In the context of the current correction, next week will be interesting, when we will get the earnings of Tesla (Tuesday), Meta (Wednesday), Microsoft (Thursday) and Alphabet (Thursday). All these results will be released after the market close.


Next week important macro data include US GDP for Q1 on Thursday (Wall Street expects +2.1%, but the Atlanta FED tracker's latest reading is as much as +2.9%), and PCE inflation on Friday (the market expects +0.3% MoM).


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