AroniSmartInvest™ and AroniSmartIntelligence™ in Action: Analysis of Volatility of Stock Market Indices, Treasury Yield, Gold, Silver, and Oil as Year 2022 Ends

Year 2022 is ending. During the year, the stock market has  experienced major dynamics, mostly with historical randomness and a downtrend rollercoaster.  The major upbeats sentiments and performance observed in 2021 were almost washed out. The main drivers have been inflation, Federal Reserve interest rates actions, international politics, including the war in Ukraine and the dynamics in the Chinese economy and US economic policies.  In early Q4 2022, the stocks rose, in anticipation of a softening inflation following the rise in interest rates, some positive earnings ahead and softening worries of recession.  But the volatility has remained high,  driven by continued worries of recession and recent dynamics in tech companies, including layoffs, persistent inflation in some sectors, and slowing down growth in others. The S&P 500, DOW, NASDAQ, Russell 2000, Crude Oil,  Silver, Treasury Yield, Gold all have been impacted and went though major volatilities. Hence the picture of the year,  as the year is ending  has been historic: a widespread volatility and growing fears after a fueled momentum over 2021. As highlighted in several analyses, major questions coming from investors  and users leveraging AroniSmartIntelligence™ and AroniSmartInvest™ capabilities remain focused on the findings from analyzing the connection among the key Stock market indices, especially NASDAQ Dow Jones(DJI), S&P 500, Russell 2000, Gold,  Silver, Treasury Yield and Oil and some key stocks, generating some meaningful trends. Based on these questions,  AroniSmart™ team, has continued to leverage the advanced analytics tools to analyze the trends of the key market indices  and a few selected stocks across some sectors, such as Technology, Finance, Retail, Healthcare, and others  as the year 2022 ends.  The key findings are captured in this article.

The performance over 2022 has, overall, significantly been impacted by the Federal Reserve's latest monetary policy regarding inflation, the continued uncertainty on the Chinese economic policies, worries of recession, Ukraine war and somewhat the COVID-19 pandemic new variants. As expected by  economists and most major banks,  the Federal Reserve agressively raised interest  rates seven times.  So far, the interest rate has been raised seven times, from 0.25% to 4.5%, with the 75point raise in early November 2022 and 50point raise in Decemberr 2022,  marking a  seventh consecutive rate hike, the fourth straight three-quarter point increase, and the latest one  a-half point increase, and pushing borrowing costs to a new high since 2008.  The Federal Reserve has confirmed that it will continue to raise the target range for the federal funds rate  in the upcoming year, as the inflation persists, but by smaller steps.

These changes have negatively impacted all the market indices, as the Treasury Yield 10 Years (^TNX) continues to increase.

AroniSmart™ team, leveraging the Machine Learning Time Series capabilities, including Support Vector Machine,  and Neural Network Analysis of AroniSmartIntelligence™ ,  has analyzed the trends of  key  stock market indices (DJI, NASDAQ,  S&P 500, Russell 2000, Oil, Gold)  between  mid Nov 2021 and  mid Nov 2022 and came up with insights and  projections on the dynamics.  

The insights are presented below (for disclaimer and terms, check AroniSoft website. For related analyses of Stock Markets using Time Series, Dominance Analysis, and Neural Network capabilities see here  AroniSmartInvest™ and AroniSmartIntelligence™ in Action: Analysis of Volatility of Stock Market Indices, Gold and Oil in Mid-November 2022  and 

AroniSmartInvest and AroniSmartIntelligence Stock Market Analysis: Update on Market Sentiment and Highlighted Stocks at the End of Oct 2022).

The analyses produced the different measures of forecasting accuracy, including  directional accuracy of Stock market indices. Directional accuracy is an important statistic when ones tries to look at the prediction of a given stock market indice  vs others and key selected stocks, for example, as in this case, the  NASDAQ , S&P500,  RUSSEL 2000, or DJI Adjusted Closing Price as a function of other stock market indices, Gold,  Silver, and Oil and selected stocks and Treasury Yield.   There was also good insights from Dominance analyses that were performed to see whether there are major connections  among indices, assuming investors are moving from some market indices to others, especially from tech dominated  NASDAQ to DJI, or from stocks to Gold, Oil, and Silver.

A little bit of the usual investment research before coming back to AroniSmart™'s findings.

Indices Momentum and Downward Trend

In general all indices have experienced an upward momentum  over 2021 and to January 7, 2022: Dow Jones (.DJI) had grown by 16.84% to 36,231.66; S&P 500  (.INX) by 23.09% to 4,677.03;  Nasdaq Composite (.IXIC) by 14.57% to 14,935.90; Russell 2000 Index (RUT) by 4.25% to 2,179.84, Crude Oil by 50.7% to 78.95 and Gold by -1.93% to 1,794.00. 

Since then, year-to-date (YTD) by  December 19, 2022, the stock indices have experienced very poor performance and  have been significantly down.  The downward trends have appeared to reverse in late Q1 and Q3 2022 but the market went back to high volatility, swinging between the opening and the closing of the market. Since early Q4 2022, the market started to come back. In fact, starting with the second week of January 2022 to November 2022, all stock indices have decreased significantly and as of to date the performace is negative across the board with the following decrease by index:   Dow Jones (.DJI):  -5.22%; S&P 500  (.INX):  -10.52%;  Nasdaq Composite (.IXIC): -17.77%; Russell 2000 Index (RUT): -5.86%, Crude Oil: -1.09% and Gold: -0.62%.

The performance YTD is even worse for all, except Crude Oil, Gold, Silver,  and Treasury Yield with:  S&P 500: -17.6%; NASDAQ: -28.32%; DOW Jones: -9.13%; Russell 2000: -19.1.62%;  Crude Oil: -4.1%; Gold: 0.00%; and  Silver: 3.17%

 Crude oil that had experienced significant growth until November 2022 has started to decliine signifcantly, as the Treasury Yield continued to increase and the inflation to soften.

In the same period the Treasury Yield 10 Years (^TNX) has increased by a whopping 102.22%, as the he Federal Reserve continued to  raise  rates. 

The latest analyses solidify the findings about the aligment of the dynamics of all the stock indices, with minor differential trends. All the indices, except Crude Oil, Silver, and Gold have been behaving similarly. The findings reinforce the hypotheses that the growing inflation, the worries of recession and the expected Federal Reserve economic policies have been the major drivers of the market in 2022, while the impact of various sectors and the specific composition of the different indices played a minor role. Another finding confirms that, YTD,  value stocks continue, relatively, to perform better than growth stocks.  As the year ends, some dynamics are changing: worries of recession have increased, inflation is softening, Federal Reserve has started to reduce the points of raise, the pandemic persists, with three combined agents, increasing layoffs, increased investments in semiconductors in the US.

Hence,  Year 2023 will fuel on the persistent dynamics: worries of recession, softening iinflation, pandemic impact, less reliance on China for some investments including semiconductors, Electric Vehicles, and microchips, increased layoffs and unemployment.

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Similar Trends with  Differential Nuances.

AroniSmart™ team  analyzed  stock indices performance dynamics, leveraging the  Econometrics and Time Series Support Vector Machine  and  Neural Network Multilayer Perceptron  capabilities  of  AroniSmartIntelligence™ and Machine Learning and Sentiment Analysis of AroniSmartInvest™. The team uncovered interesting insights, as shown below. The team analyzed the performance of  Dow Jones (.DJI), S&P 500  (.INX),  Nasdaq Composite (.IXIC), Russell 2000 Index (RUT) Adjusted Close vs  Adjusted Close of the other indices ( Crude Oil,  Silver, and Gold) and key selected stocks  from  December  20, 2021 to December 19,  2022.

From the analysis, it was confirmed as before that these indices basically follow similar trends. Also, they are all similarly impacted by the market conditions. However, the analysis found important nuances. 

The key findings highlight:  the indices studied had an upward momentum over most of the period. Trendwise, in late Q2- early Q3 2021, the stocks   reached  high or record  price levels.  Then in September and October, 2021, the dynamics pointed to a slow down, downward trends, seesaw movements, and there were major speculations about a potential correction. The volatility increased in Q4 2021. In  early January 2022, all indices started giving up some gains and by January 28, 2022, they were significantly down, except for Oil, Silver, . On January 31, all indices went up vs January 28, 2022.

Figure 1: Key Indice Price Trends - S&P 500, Russell 2000 and Gold   in Dec 2021-Dec 2022.

Figure 2: Key Indice Price Trends - Silver, Crude Oil, Treasury Yield   in Dec 2022-Dec 2022.

Figure 3: Key Indice Price Trends - Dow Jones, Nasdaq, Silver, Crude Oil, Treasury Yield   in Dec 2022-Dec 2022.

Figure 4: Key Stocks Indices Trends  in April 2022- Dec 2022 -- All Market Indices  Test Data model.

Figure 5: Key Indice Price Trends  in Dec 2021- Dec 2022 -- All Indices Training Data model.

Over 2021 all the stocks indices built on an earlier momentum, almost following similar trends.  

By July  of 2021  most indices were above the  average Q1 2021 levels. In early Q2 2021,  all indices momentums were significantly impacted by the market conditions. In late May 2021, they bounced back and maintained momentum until late September 2021 (see charts below). Since then, the indices have been experiencing seesaw dynamics.  The new market conditions, including the news about the pandemic have severly impacted all indices since December 2021 into January 2022. As expected, the indices do not exactly follow the same trends and projections, neither in training nor in test data (see DJI and NASDAQ examples below).

Figure 6: Crude Oil  Step Estimate  Oct 2022 - Dec 2022

Figure 7: Crude Oil Stock Market Index Trends and AroniSmart Projections Analysis Between April 2021 and November 2022

Figure 8 : Crude Oil Stock Market Index Trends and AroniSmart Future Estimates Analysis Between December 2021 and September 2022

AroniSmartIntelligence™ modelling shows the stock indices that  appear to mirror each other: a high opening for  the stock market indices that tends to lead a decline or slow down in  NASDAQ's adjusted closing price and a high opening for  the  stock market indices that tends to lead an increase or growth in  NASDAQ's adjusted closing price.  Late Q4 2020 - Early Q1 2020 and late Q2- early Q3  dynamics appear to positively impact NASDAQ Index, whereas the end of Q3-early Q4 2021 appears to have been challenging.

AroniSmartIntelligence™ analysis, using Time Series Support Vector Machine modelling and Neural Network Multilayer Perceptron,  below, shows the weights of the different indices and the forecast statistics.  From the statistics, directionary accuracy is in general high, pointing to overall similar dynamics across all market indices.

AroniSmartLytics™ Neural Network Analysis  confirms Time Series Support Vector Machine results:  NASDAQ and DJI  momentum negatively impacted in late Q1 2022 - early Q2 2022, and late Q3 2022, generally aligned with the momentum of most of other stock market indices.

AroniSmart™ team  analyzed DJI's performance dynamics using Neural Network Analysis  capabilities  of  AroniSmartIntelligence™ and uncovered  insights confirming the performance dynamics of DJI vs   other market indices  from  November 2021 to November 2022.

See below:

 Figure 9-a:  Treasurry Yield Dynamics - AroniSmart Neural Network Analysis Results - Model setup and network  for the Period  Between November 2021 and  November 2022

 Figure 9-b:  Treasury Yield Dynamics - AroniSmart Neural Network Analysis Results - Weights  for the Period  Between December 2021 and  December 2022

 Figure 9-c:  Treasury Yield Dynamics - AroniSmart Neural Network Analysis Results - Network  for the Period  Between December 2021 and  December 2022

AroniSmartInvest ™ Analysis on some sttocks confirms Support Vector Machine results: Stock Indices  momentum impacted in 2022 and generally aligned with the momentum of most of other stocks.

AroniSmart™ team  analyzed the performance dynamics of some slected  stocks using AroniSmartInvest™ and uncovered  insights confirming the performance dynamics among all the key stocks and the  market indices. See below.

 Figure 10-a:   AroniSmart Stocks and Sentiment Analysis - Market Profile

 Figure 10-b: AroniSmart Stocks and Sentiment Analysis - Segmentation

 Figure 10-c:  AroniSmart Stocks and Sentiment Analysis - Portfolio view

 Figure 10-d:  AroniSmart Stocks and Sentiment Analysis - Sentiment Analysis

 Figure 10-e:AroniSmart Stocks and Sentiment Analysis - Sentiment Analysis Tags

 AroniSmart Stocks and Sentiment Analysis - High Short Growth Stocks Tags

 Figure 10-g:AroniSmart Stocks and Sentiment Analysis - High Short Growth Stocks Tags - Bayesian network

AroniSmartLytics™ Dominance Analysis confirms Support Vector Machine results: Stock Indices  momentum impacted in 2022 and generally aligned with the momentum of most of other stocks.

AroniSmart™ team  analyzed DJI performance dynamics using Dominance Analysis  capabilities  of  AroniSmartIntelligence™ and uncovered  insights confirming the performance dynamics among all the stock market indices, especially Treasury Yield (TNX) vs  DJI, SP500, NASDAQ, Russell 2000, Oil, Silver, and Gold  from December 2021 to December 2022. See below:

More detailed analyses can be conducted using AroniSmartIntelligence™ Big Data, Machine Learning, Time Series and Sentiment Analysis capabilities.

For  more on AroniSmartIntelligence and AroniSmartInvest capabilities, visit AroniSoft web site by clicking here. AroniSmartInvest™ and AroniSmartIntelligence ™ are available on Apple's App Store.

©2022 AroniSoft LLC

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