SPY - SPY: The Upside Is Likely Capped
2024-06-20 09:20:41 ET
Summary
- I believe the growth potential of SPY is actually capped, and investors should underweight it not only relative to other geo markets but also to other asset classes.
- Despite record capital inflows into S&P 500 ETFs, indicators like ERP suggest owning SPY may be less attractive than bonds.
- The U.S. economy shows signs of slowing, with weakening retail sales and consumer sentiment, raising downside risks for SPY.
- In recent weeks "Doctor Copper" has fallen >11%, which has clearly created a large gap with SPY.
- The price action on the SPY looks quite stretched today as it touches the higher Bollinger Band (2 standard deviations) while the RSI reaches a local high and approaches 75 on the weekly chart. I'm neutral on this ETF.
Macroeconomic analysis is the most complex and perhaps the most interesting type of financial analysis I have ever done. Unlike traditional equity research, or performing quantitative data analysis, where the framework is usually predetermined, macroeconomics is so complex and comprehensive that one can learn something new about it even on a daily basis. Accordingly, the cycle of information becoming obsolete, i.e. losing its relevance, is much shorter - you have to keep looking at the reality around us from different angles more regularly to understand something. That's why I decided to update my coverage of the S&P 500 Index ( SP500 ) ( SPY ) today, as it continues to amaze many (myself included) with its strength against all odds....
SPY: The Upside Is Likely Capped