Market Snapshot: Worst Quarter For S&P 500 Since Q4 2008 And Second Best Ever For TSYs

Tyler Durden's picture

Equities ended on a very weak note, bringing the worst quarter since Q4 2008 for the S&P500 to an end. Stocks remain, perhaps remarkably to some, expensive relative to credit markets - especially HY which is feeling significant pain as issuance volumes drop 75% in the quarter to their lowest since Q2 2009. While stocks dropped around 2 standard deviations from a long-run mean, Treasuries did even better and rallied around 3.5 standard deviations - the second largest percentage shift in yields ever (once again Q4 2008 was the only better). Truly a remarkable day, week, month, and quarter and to be frank, one that shows no signs of slowing.

Quarterly percentage change in S&P 500 - down two standard deviations - highest since Q4 2008.


With Financials and Industrials bearing the brunt down around 19% and Utilities outperforming on the quarter in the US.


Quarterly percentage (yes I know that's a little odd but given the range of yields over the period we thought it would make sense) in 30Y Treasuries - down 3.5 standard deviations - second largest drop ever.


Since the end of QE2, there has been significant weakness (obviously) and we recommended a QE-Unwind trade back on May 16th. It has performed rather well - besting the S&P 500 by over 21.5%.

Somewhat interestingly though, the US remains the best performer among global equity markets (in USD terms) with only Mexico and Switzerland beating it in local currency terms for the quarter. S&P 500 -14.33% QTD, Dow -12.09%. Perhaps more notable is the year-to-date numbers where US equities are the clear winner (so far...) and the Dow down only 5.7% (S&P -10%) - last two columns for local and USD-based returns.

and finally with everyone talking about the big rotation-allocation trade from bonds to stocks - bear in mind that these reallocations are not done in a vacuum but based on a risk-budget and the change in the VIX this quarter just broke all records - with a 4 standard deviation jump on the quarter - perhaps now the bonds vs equities divide will narrow as we have discussed at length (drawdowns and risk-returns).

A few other fun facts:

  • S&P 500 in constant USD terms (adjusted for DY that is) -9.8% QTD
  • Gold still managed +8.2% QTD while Silver lost 13.85%
  • Oil lost 18.95% on the quarter while Copper lost 27.6%
  • HYG (HY bond ETF) lost 9.3% while LQD (IG bond ETF) gained 1.98%
  • IG16 (investment grade credit spread index) widened 48bps (price equivalent from 100.4 to 98.3 or around 2% loss) while HY16 (high yield credit risk price) lost a huge 11.3%!
  • oh and NFLX -56.9% & MS -41%!!!


Charts: Bloomberg

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Josh Randall's picture

ROCKTOBERFEST here we come, B!tchez!

GeneMarchbanks's picture

Dow rape to continue? I hope MS & BAC finally wave good-bye as it is long overdue.

DormRoom's picture

be careful what you wish for.  Paulson Fund owns a lot of bank stock.. If the banking sector cave, he'll be force to liquidate GLD to cover, and bring down other hedge funds with him.

max2205's picture

DJIA is now a Govt controlled number. Think BLS or CPI

covert's picture

keep cleaning out the excessive optimisim.



mayhem_korner's picture



CNBC searching for that Canadian she-porter for a little spin on this...

GeneMarchbanks's picture

CNBCialis as Peter Tchir so succinctly put it.

SheepDog-One's picture

The Canuck Breck Girl while lovely, would explain this by saying investors are nervous because they dont think equities are backed by anything? Then she'd go to her second gig, modeling shoes.

The Axe's picture

Tyler,,,,Will OIL    Fall it broke 80   today on nice volume........charts (to me)  look like a retest of 60? 

junkyardjack's picture

Deflationary spiral, Bitchez!

Spitzer's picture

Not so fast.... To make a long story short about treasuires, gold, the Dollar and the Euro,  visit my blog.



SheepDog-One's picture

I think theyd love nothing more than to see commodities shoot higher, but no one can pay for higher prices, so inflation remains basically impossible.

monkeyshine's picture

"no one can pay for higher prices, so inflation remains basically impossible."

Interesting quote. I agree with the part here that I quoted.  Though in fact producers and manufacturers are paying higher prices, partially offset by lower labor costs (smaller workforces) and international money exchange.  Producers are afraid to raise prices in this economy. Even if commodity prices are up because of cheap money given to speculative institutions, the producers are eating those input costs.  If deflation comes, some producers will become predatory. 

It is a little baffling that despite all the overpriting and overspending we are still at risk of deflation. I have held that the US has been able to run these deficits and print excess monies in large part because the rest of the world is growing too. Dollars are being stashed all over the world and now with the Euro in flux the appetite for dollars may be larger than many thought.  The inflation people feared hasn't really materialized. The markets are up from 2008, but not much else is. 

Of course, the problem is money velocity.

At risk of lots of red arrows, I will say all this: I suggest PMs as well as other commodities could ease dramatically in the coming months.  Those long gold have been well rewarded, and may be well rewarded in the future. But between the past and that future may lay another buying opportunity - at least until QE3. And if there is QE3 it likely has to be so massive as to force those holding dollars to start spending and lending them.  Possibly as large as $3 trillion, or even higher.  To politically justify that kind of stimulus, markets have to plummet. If the FED had any brains, they would try to work it through congress in the form of "home loan adjustments" e.g. create a way for homeowners current on their mortgages to easily refinance  in the low 4% range. At 2x the 30 year Treasury rate, 4% offers more than enough incentive considering that most of those who can't pay have already defaulted. This kind if stimulus will put money into the pockets of the people you are talking about.  A $300,000 mortgagee will see his payments drop $250 a month  or more (from 5% to 4$), while a $1 million note (think, California, New York homeowners) will drop around $1300 a month going from 6% to 4%.  That's serious money to each respective cohort and everyone in between.  

I know many here will lambaste this comment as just repeating the same madness, not fixing the real problem, etc etc.  That may well be true. However, the system is the system is the system. It won't change itself. This is about as creative as it can get in the circumstance.  We can fix the root of the problems later.  Deflation will be an experience few living people have ever experienced and it will be very hard to get out of. Trickle down wont work. Massive injection of money at the bottom is what it will take, assuming we are going to experience deflation, which I would give odds on. 

Bobbyrib's picture

The second half of your post will never happen. The government doesn't give a crap about people not worth millions/billions. I know Obama has suggested similiar plans in the past, but the Republicans will never let legislation like this pass. Banks would get screwed on perfectly good loans, while middle class homeowners would receive a bailout.

If you are purposing that the government make up for the lack of mortgage interest, the banks will be missing out on, the debt ceiling would have to be raised again and we all know how that went last time. It's not time for the US government to take on more debt.

If you have money deflation is not that bad. You pay less and if you don't save your entire discretionary income you would purchase more products for less money. I'm already spending whatever money I no longer have to put into my gas tank as gas declines in price. Also I suggest buying food cheap that will stay good for years so when hyperinflation eventually hits, you'll have your food before TSHTF.

Mr_Wonderful's picture

Yeah, inflation will remain elusive for years to come, given the weak labor market and declining wages. The public has finally in the last two years started scrambling to pay off debt and to save, all in anticipation of falling prices.


The Axe's picture

Tyler,,,,Will OIL    Fall it broke 80   today on nice volume........charts (to me)  look like a retest of 60? 

LMAO's picture

Right, I thought these EOM windows weren't properly dressed.

What now? Stampede into USD, crash equities and force the Bernank QE-inf.. hand?

disabledvet's picture

Had my bin's out and window dressers were hiding some SERIOUSLY cheap furniture. I don't know about you but I was SHOCKED!

fuu's picture

The drapes do not match the astroturf.

slewie the pi-rat's picture

how much for the troll in the window?

junkyardjack's picture

US remains the best performer, Yes We Can. Hopium is still in effect.  Once Occupy Wall St hits the rest of the country I'm pretty sure we'll manage to catch back down to the rest of the world

kengland's picture

Volume was pathetic today. When are the going to sell this thing in earnest!

SheepDog-One's picture

I dont know, but has to be sometime soon. Im not worried so much about an exact date, just getting the remote mountain cabin stocked as theres no doubt it IS coming.

Smiddywesson's picture

The fun begins on Monday as Q4 begins.  If they hope to let off some steam and then ramp things into the election, it has to be right friggin now.


Rainman's picture

This market will get sold when the institutionals throw in the towel on QE3. The pension funds are celebrating a recovery summer....just before the 3rd quarter train hits them. Amusing.

kengland's picture

Agreed. Bernanke continues to speak to that effect as well.

kito's picture


check out these gold derivatives by jp morgue

GeneMarchbanks's picture

'The leviathan JPM, uber bank of Rockefeller and Morgan, holds 80% of the gold derivatives in the world, with HSBC having the rest. HSBC was founded in the British colony of Hong Kong and is now headquartered at Canary Wharf London'

Great find, Jesse's been on the mark big time.

Belarus's picture

Buffett's gobbliing up stocks like he was in the fall of '08, too. It's not 2008' it's exactly like 2008. Expect another 30% decline from here unless the Inkjets makes those HP printers start singing soon.

mynhair's picture
  1. He's eating his own jiz.
kito's picture

if big ben doesnt start printing you are going to see oil at 30.

junkyardjack's picture

And gas will be...well right about where it is right now. Screw the consumer

cbxer55's picture

You want gas? I got gas!  ;-)

Five Alarm chili farts anyone?  :-0

mynhair's picture

30?  Never again.  You can make margerin out of it.

SheepDog-One's picture

Theres always the specter of this escalating war in the mid east with Iran next on deck to be 'liberated'...and all it would take is 1 carrier sunk in the Hormuz Straits to send oil right back to $140 overnite. 

disabledvet's picture

Israeli's goin all in on South Jeruselum while the US Ambassador is attacked in Syria doing anything but Ambassador work. Let's here it for war people!

Frank N. Beans's picture

this (today) is just end-of-the-month window dressing.

wait till October

Vampyroteuthis infernalis's picture

I wonder how much of the last couple weeks' worth of action was Hedge Fund vs Hedge Fund. Think of it this way. You as d-bag successful HF is doing ok while cock-sucker is having double digit losses. You d-bag know that cock-sucker has to ramp at end of quarter if you want to live another day. D-bag does this, buys equities cock sucker owns back about two weeks ago. Ride it to the top as CS tries to survive. D-bag sells off (then shorts) over the last few days with profits and CS is now further underwater. Cock sucker has to liquidate in October. D-bag picks up the equities at bargain basement prices. 

SheepDog-One's picture

Gee I wonder why TSY's did so good...OH thats right, the FED is now buying them up by the boatload, betting that soon the New World Order plan will be a total success and free slave american labor will make their bonds good.

Its a bet I wouldnt take myself, but FED is 'all-in'.

monopoly's picture

Just one thing to say here.

THANK YOU Zero Hedge!

buzzsaw99's picture

so then you are saying we should be buying emerging markets bitchez? [/straw snark]

css1971's picture

Cool. I've set some limits that look insanely optimistic at the moment, wonder if any will get tripped.


The 1930s put everything into perspective mind you.


mynhair's picture

TZA @ 100?

Or are you buying?

Stoploss's picture

Put yer crash helmets on.. Solid close below the 200dma.

Tsar Pointless's picture

For once on a Friday afternoon, I have to agree.

This ship is sunk.

The S&P will be lucky to stay above the 900s next week.

mynhair's picture

Remember the PPT was refunded in the debt cop-out.  We bounce around 1100 for a while.

kengland's picture

Huh? It's been that way for over a month.