The Beginning Of The End?
by: The Heisenberg
- Does that mean this all falls apart completely on Monday?
- No. But it does mean the writing is on the Wall.
- Herein, find the data and the charts that back up that assessment.
The Quant-Insight PCA macro factor model shows that the long-term (250d) model for SPX pricing shows that 'shares outstanding' increases in SPY ETF have been the second largest factor sensitivity for SPX, i.e. the shift from active to passive from both institutions and retail flows has been a massively important price support for SPX.
This relationship 'peaked' in the "post- US election through Jan '17" period… and has since collapsed precipitously, down to 'zero' in fact. Thus, increases in SPY shares outstanding are showing no impact on SPX short-term prices.
"Investors have reduced expectations for the timing and size of tax reform," Goldman wrote on Friday afternoon, adding that "after outperforming the S&P 500 by 520 bp post-election, our basket of stocks with the highest effective tax rates has given back all of its post-election gains in the last three months."