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Highlights
- The effect of a negative shock is 3X worst that the effect of a disappointment
- The effect of a negative shock is longer lasting than the effect of a disappointment
- The market does retain memory of prior states
- Seems like each negative political macro event has approximately negative 3% impact on the SnP
Series of events
Wednesday, 31st July 2019, 2pm, US Federal Reserve’s disappointment
- Federal Reserve announced an interest rate cut of 0.25% from 2.5% to 2.25%
- no hints of further cuts
- before announcement SPY price 300.04
- after announcement SPY price 296.98
- net effect on SPY -1.02%
Thursday, 1st Aug 2019, 10.26am, US President’s negative shock
- President Donald Trump announced additional 10% tariffs on remaining 300 billion imports from China on Twitter.
- before announcement SPY price 300.45
- after announcement SPY price 291.02
- net effect on SPY -3.14%
- SPY price still above the 7th June 2019 price of 288.97 when the effect of Fed’s hint to adjust interest rate cuts has been priced in.
Sunday, 4th Aug 2019, 6.20pm PST, China exchange rate sinks below 7CNY/1USD for the first time
Monday, 5th Aug 2019, 9.58am PST, China suspends purchases of US farm products
- US Market takes a sharp dip on Monday
- SPY price 281.90 at lowest point
- net effect on SPY -3.13%
Monday, 5th Aug 2019, 5.27pm PST, China announces fix to prevent further RMB depreciations against the USD
- US market rebounds
- SPY price 293.55 at highest point
- net effect on SPY 4.13%
13th Aug 2019 Trump announces delay of tariff
- US market rebounds
- SPY price 292.32 at highest point
- net effect on SPY 1.91%
14th Aug 2019 UK and US 2 years / 10years yield curve inverts. Germany reports GDP shrinkage for 2019Q2
- US Market takes a sharp dip
- SPY price 284.20 at lowest point
- net effect on SPY -2.77%
Related artifacts
Trump’s tweet on additional 10% tariffs at 1st Aug 2019, 10.26am PST
Chinese RMB crosses 7RMB/1USD for the first time on 4th Aug 2019, 640pm PST
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