Risk-On Markets for Monday: Risk-free Rates Falling

We see a fall in risk-free interest rates, and this is bullish for stocks. It creates an incentive to put money back to work in risky assets.

UST 10-year yield: 3.395%
UST 1-year yield: 4.332%
UST 3-month yield: 4.293% 
UST 1-month yield: 4.150%

Our Chicago Quantum Net Score risk-free rate of return is: 4.30%.
This has the effect of increasing the expected return to risk assets (the return over risk-free) to 4.27% from under 4% earlier this week. This means the model 'CQNS Power' or the relative strength of expected return over historical risk is 3.35, which is slightly elevated over early this week. This isn't enough of a change in the risk free rate to make a big difference, but it is on the way.

The expected return of 3,407 / 3,419 stocks (and ETFs) that pass data validation today is 9.29%, which is also elevated from recent weeks. Why is that? The BETA of the stocks are increasing as the risk or volatility of all individual stocks rise. Why would the risk of all stocks rise? Could be reduced liquidity, increased speculation, bets on ODTE options, bets on normal monthly options, or something else completely. It also could be a reduction in the historical risk in the S&P 500 Equity Index, which we have seen, coupled with a slight increase in individual stock volatility.

Regardless of the causality, the expected return of a large basket of stocks is above inflation, or 9.29%, and the expected return to risk (the portion above risk-free rate) is now 4.27%. If this trend continues (lower interest rates and higher market returns expected), then we will see a return to risk-on behavior. Only time will tell.

Today's stock run (valid for Monday morning, March 20, 2023, has 26 stocks held evenly, and the edge over the runs earlier this week is up about 20%. So, fewer stocks and a higher edge. Part of that could have been due to the inclusion of ETFs into the CQNS UP run universe of stocks, but none of those ETFs are in the optimized portfolio. 

 Net-Net: The reduction in risk-free interest rates, and the slight reduction in volatility for the S&P 500 is bullish for the US stock market, and our model has shifted to Risk-On for Monday morning.


Here is the rest of our BLOG post for the markets. We included this in today's video on Youtube.

We discuss the results of our Chicago Quantum Net Score quantitative analysis, which suggests to take a little more risk in stocks. The market appears to be turning slightly risk on, and we sense that Monday should be an interesting and good day to trade. Here are some overall points we made during the recording, and in the live chat. 1. Interest rates are falling aggressively. Large moves to make bonds more valuable, and interest rates to fall. 2. The VIX or implied volatility against a fall in US stocks, is significantly higher now. It has been screaming higher this week, showing that the cost of insurance against a stock market fall is significantly higher than a few weeks ago. It is above the trend. 3. Energy prices (both oil and gas) have fallen through the floor. Prices are down for Oil about 18% in just a short time. That is ua dramatic fall. We give a prediction on why this is. It's in the video, and a bold and shocking ideal We also discuss the $UBS and $CS corporate action, where UBS buys CS for about two billion dollars, along with Swiss Government Guarantees. This is when you get your shopping list dusted off.
​Good luck to all.