LeBron, The Fed and the S&P 500

• Posted by Greg Harmon
• on September 21st, 2016

For stock and band market participants today marks the end of the September FOMC meeting. At 2 pm the Fed will issue a statement on monetary policy and the markets will go into turmoil for 5 minutes, maybe more. With the Fed Funds futures market indicating about a 15% chance for a rate hike there is not likely to be much that really changes. History shows that nearly all rate hikes have been priced into the futures market before an announcement.

So instead of wasting your time today waiting for Janet Yellen and her posse to change 3 words in the policy statement, let’s look at some meaningful history that most are ignoring. That is the tight correlation of the S&P 500 to the LeBron James. The chart below shows the path of the S&P 500 ETF ($SPY) since the LeBron announced his return to the Cavaliers a little over 2 years ago in July. And the correlation is stunning.

You can see how the initial reaction was to sell the news, but then the market recovered until LeBron had to rest his sore back. As the Cav’s opened their season in the 2014/15 campaign the market popped higher. It was reluctant though, wanting LeBron to prove he could win. He did win and brought the team staggering into the NBA finals. With Kevin Love out with his arm pulled out of his shoulder, and Kyrie breaking his knee the Cav’s lost to that team from Silicon Valley.

The Cav’s and the market focused on the 2015/16 season. Then there were troubles with the Tristan Thompson contract. The market reacted by falling hard in August 2015. It took the start of the 2015/16 season, with Tristan on board, to start the market back higher. As the season progressed and there was clearly some issues with the relationship between coach David Blatt and LeBron. In games you could see LeBron talking to the team about strategy during a time out, not Blatt. And Blatt would seem aloof during press conferences.

Eventually Blatt was fired and Ty Lue took over. That marked a bottom for the market in early 2016. It continued higher from there until the NBA Finals. Down 3-1 in the Finals it looked dire and the market reflected that. But the Cav’s mounted unprecedented rally back to to win. With a Cav’s victory over a seemingly non-present Steph Curry the last 3 games, and his wife Ayesha crying about the league being rigged, the markets moved higher.

Now the pre-season camps are about to begin and there is concern again. JR Smith, or JR Swish as he is known in Cleveland, is still not signed and will not attend the camp. The market has seen this coming and pulled back at the beginning of September. What will happen next. clearly you need to follow leBron and the Cav’s to determine that. All I can add is that LeBron has signed a 3 year $100 million contract with the Cav’s. Oh, and if you are wondering, those vertical red lines in the chart represent FOMC meeting dates.

Celebrating 5 Years

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through September 2016 and sign up here  for a special $499 first year offer.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus