Market indices in times of doubt

Market indices in times of doubt

by Pininvest Analysis

US S&P 500 ETFs on

  • 21 constituents
  • 49.6% 1y performance
  • 17.4% volatility
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Over the past years, index ETFs – and notably ETFs linked to the S&P500 – have been popular as a way to run with the total market, or at least with what was assumed to be a fair representation of the investable US market

Including a few critical outliers, 5 or 6 equities earning the FAANG nickname, Facebook, Apple, Amazon, Netflix and Google (to which Microsoft was added lately), the strategy mirroring the top 500 assets, weighted by market cap, has held up consistently well

Because a remarkably small number of assets were capturing the better part of the upside, it makes good sense to conclude that many assets were not sharing in this buoyant ‘ever-rising’ equity market

Portfolios concentrated on these large market-cap companies with growing sales and profitability (in most cases) proved to be a sure-fire winning strategy, and this may still be true as October market turmoil subsides


At pininvest, we are committed to providing the tools to explore alternative outcomes and to identify possible trend reversals

For this purpose, we feature pinindices on our site

  • we rely on a broad market-cap weighted index of 1 200 top assets listed on NYSE and NASDAQ, the DATAvariance 1200
  • we chart performance but also volatility history of the total index and of sub-indices
  • we present an overview (and details) of performance and volatility by sector

By selecting a preferred time frame, between 1 month and 1 year, significant trends can be researched


3 months Aug. 9 / Nov. 7 Sub-Index Performance Chart

In line with our general comment, a comparison between sub-index performance of the largest 240 and smallest 240 assets, ranked by market cap in our DV1200 index, demonstrates how the bottom fell out for the smallest companies of our index from mid-September (red line), 10 trading days before the sharp reversal early October


3 months Aug. 9 / Nov. 7 Sub-Index Volatility History

Comparing volatilities  sends the same message with a notable jump in volatilities from mid-September for the small companies, frontrunning volatility of the largest segment of the index, 2 weeks later.

Note that volatility is an average of daily volatilities observed over the past and pinindices calculates all volatilities from daily data over the past 6 months. Averages are based on the EWMA method, assigning overweight to the most recent daily volatilities

This means, for instance, that the volatility recorded on Aug. 9, 2018 is the average of volatilities over the time frame Februari 9 - August 8, 2018

Volatility charts are of special relevance for comparing data sets, as is the case for sub-indices


1 month Oct. 7 / Nov. 7 Sub-Index Performance Chart

The same comparison between largest and smallest segments of the 1200 index over the last 30 days, from Oct. 7  to Nov. 7, provides additional information : the smaller companies start outperforming (-0.65%) their larger brethren (-3.69%) as of Nov. 7, 2018

This may imply that sector rotation is – at last – having an impact on the market, to the benefit of the smaller and often more staid shares


Sector Comparisons

Another feature of pinindices – the sector overview – highlights the sectors involved, such as Utilities, Healthcare, Consumer non-durables, Consumer durables, or Real Estate

By selecting reference periods of 1, 3 and 6 months, the trends can be observed in detail

Comparison of Sectors - Performance & Volatility - 3 months data set

We draw your attention to the fact that pinindices is a free tool made available by for your personal analysis of market trends

Our comments are meant to demonstrate that, by tracking the vast library of indices created by pinindices, it is possible to identify significant trends but our analysis is not an investment recommendation and should not be interpreted as such

In a changing market,  we strongly suggest you control your preferred indices on a regular basis