We did a project to explore the repeated symptoms or trends related to the S&P 500 index. The project wants to verify whether these symptoms or trends still exist in the current COVID-19 crisis. We assessed the valuation of the S&P 500 index against the unemployment rate and the Federal Fund Rate. We analyzed the performance of different sectors/industries of the S&P 500 during a stock crisis. We used Tableau desktop to visualize the data. To improve interactivity, highlights and parameters are used. Users can use the highlight function to check the industry that they are interested in. Users can also use the parameters to define crisis start points and compare different sector performances during any crisis. The Tableau visualization link is https://public.tableau.com/app/profile/hui.wang1742/viz/ProjectHuIWangSP500v1/StockHistory.
We found that the S&P 500 index strongly correlates with the unemployment rate, even during Covid 19.
We found that the S&P 500 index is also related to the federal fund rate. When the stock market went down, the federal fund rate also went down. When the stock market went high, the federal fund rate also went high, though the increase rate was not the same. The correlation also existed in 2020. This suggests that the stock market still has its rationality even during Covid 19: there are speculations, but it has not broken away from economic factors yet.
We found that the second half of the year had more growth opportunities. However, N December was the most volatile: they often had either a significant increase or a significant decrease. Also, April frequently went higher when compared with March. Therefore, it seems that the end of March or the beginning of April is a good time to buy in.
By analyzing stock crises, I found that the energy sector was the first to recover in the 2000 Dot-com bubble, while the technology sector was the last one to recover. However, this gradually reversed. In the 2008 financial crisis, energy started to recover below the average speed - the recovery speed of the S&P 500 index. Meanwhile, the technology sector started to recover faster than the S&P 500 index. In the 2018 cryptocurrency crash, the energy sector became the last to recover, while the technology sector became almost the first one to recover. In the 2020 Covid-19 crisis, the technology sector was the first one to recover while the energy sector was the last. The financial sector shows a similar trend as the energy sector but less extreme. Overall, I see that the financial sector was another one that recovered lower than average among all S&P 500 sectors.
About the Data Source
One of the highlights of this project is the data quality. We downloaded the S&P 500 (code: SPX) and its subsectors’ data from TradingView (https://www.tradingview.com/markets/indices/quotes-snp/). We used the daily market average valuation of 7868 records, ranging from October 1989 to November 2020.
We downloaded the unemployment data (source code: LNS14000000) from the U.S. Bureau of Labor Statistics (https://www.tradingview.com/markets/indices/quotes-snp/). The unemployment rate represented the number of unemployed as a percentage of the labor force. Labor force data is restricted to people 16 years of age and older, who currently reside in 1 of the 50 states or the District of Columbia, who did not reside in institutions (e.g., penal and mental facilities, homes for the aged), and who were not on active duty in the Armed Forces. The household survey and establishment survey were used to produce sample-based estimates of employment. Seasonal impacts were adjusted on the raw data. The data was published at the end of each month.
We combine the unemployment data with S&P 500 and sector data in a single file resulting in a total of 373 records, ranging from October 1989 to November 2020. The original data has more than 373 records, but some unemployment data have publishing dates that are weekends or public holidays. The stock market does not open during the weekends or public holidays, so there was no data update. Therefore, these unemployment rates were excluded when combining them with the S&P 500 and sector data.
We downloaded the Federal Fund Rate from the Economic Research (https://fred.stlouisfed.org/series/EFFR). For this data, we have a total of 796 records, ranging from July 1954 to Oct 2020. To analyze the data for the year 2020 together with S&P 500 data, I adjusted the observation date of some months to 1-2 days ahead or after. The original observation dates are the first day of the month, while some month’s first day is the during the weekend or public holiday. As mentioned above, during weekends or public holidays, there is no stock data update. This adjustment ensures we have a data input for each month in 2020.
One of the visualizations presents a monthly rhythm. December 2020 data would provide a better idea of whether the trends still exist in the year 2020.
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