honglouwawa
Thesis
Since the GFC, we’ve entered a secular age of money printing, defined by 3 to 5 year liquidity cycles that exert a strong gravitational pull on asset prices.
In this article, I will go over a case study
S&P Weighted Position Matters Most Over Liquidity Cycle
Summary
- Top weighted stocks in the S&P 500 have strong price appreciation over global liquidity cycle bull runs.
- My case study shows price appreciation and fair value appreciation are significantly correlated with weighted position at the top of the S&P at the start of liquidity cycle bulls.
- Based on the previous two global liquidity cycles, Apple, Microsoft, Alphabet, and Amazon should be the biggest S&P benefactors of the current liquidity cycle.
- Based on the periodicity of liquidity cycles after the GFC, the current one should last into mid to late 2025.
Andrewfez provides mathematically driven insights into value related investing. He is the author of the book, How to Calculate How Much You Overpaid for Your Home During or After the Housing Bubble: A Guide to Quantifying Your Short, Middle, and Long Term Losses, written under his pen name, Thomas Smyth. Another niche area he cares about is calculating fair values of ETF's and mutual funds using his proprietary weighting formula. Andrewfez is also a classical music composer, a healthcare professional, a woodworker, an Airbnb host, and the occasional writer of fiction and non-fiction.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of MSFT, AMZN, GOOG, AAPL, META, SPY, JPM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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