2024-04: Artificial Intelligence, US interest rate, consumer discretionary price inflation as predictors for US equity 6 months out
tsterm.com is an engine that computes for causal predictors that predict future values of stocks, bonds, exchange rates etc.
As of 2024-04-18, under 6 months outlook, the common predictors behind the three US stock index ETFs QQQ.US;SPY.US;DIA.US are computed as
Microsoft MSFT (Artificial Intelligence, Partner to OpenAI, which makes ChatGPT)
US 1-3 Year Bills ETF SHY (US near-term interest rate)
Marriott MAR (consumer discretionary spending)
USDCNY (currency, linked to US and China interest rate differentials and maybe geopolitics)
US Consumer Discretionary ETF XLY (consumer discretionary spending)
Over one recent month, US treasury 2-Year, 5-Year yield rates increased by 0.25 and 0.32 percentage points respectively (FRED: DGS2 DGS5 histories). If interest rate rises, the bond price drop — the US 1-3 Year Bills ETF SHY went down 0.65 percentage points. MSFT, MAR, XLY all went down about 7%, after rallying more than 20% each over one recent year.
In fact, if one searches for MSFT, the actual prices so far over past one year are still generally “overly strong” with respect to predicted probability distributions, so the realised probability level hovers mostly between 0.5 and 1, meaning on most days, the actual price fell in the upper half of predicted distribution that had been made 6 months prior to that date.
https://tsterm.com/?q=msft&h=24w&asof=2024-04-18
It is the same case with NVDA for another example.
https://tsterm.com/?q=nvda&h=24w&asof=2024-04-18
At the moment, tsterm.com next-day net prediction for QQQ, SPY, DIA hasn’t gone down yet under 6 months outlook, from day to day. Either the current price correction will revert course, or if it goes on steadily for a few more months closer to 6 months, the engine will note the latest reality and may tone down the next-day net prediction.