Category Archives: Wilshire 5000

In our last posting on January 16, 2020, we said the following:

“Worth noting is the fact that in periods when the year-over-year (YoY) data on the stock market went negative, as last shown in Q1 2019, the following recovery exceeded 20%, at minimum.  Currently, as reported by the Federal Reserve Bank of St. Louis, we’ve seen an increase of approximately +12% from the Q1 2019 y-o-y low.”

At this time, the Wilshire 5000 sits at a +17% increase above the same quarter last year (October 2019).  Meanwhile, the GDP data says there is a long way to go before achieving the descending trendline of 2.11% (YoY) from 1975. 

Exceeding the 2.11% level in GDP will likely warrant the NBER declaring the recession as ended.  However, we will wait to see as the pandemic seems to be resisting even the best of intentions.

This is an update January 16, 2020 comparison of the Gross Domestic Product and the Wilshire 5000 on a quarterly basis from 1975 to Q2 2020.

It seems that the decline in GDP has run its course.  Alternatively, if the decline has not ended then there is not much more to go on the downside.

Meanwhile, it is challenging to think that the Wilshire 5000 does not have more to go on the downside.  However, the sudden nature of the cause in the decline and the extent of chasm that has been attained may mean that the worst is past us, buy only for those who are willing to take a 10 to 15 year investment horizon.  Traders who are long only may see more pain ahead.

see also: January 2020

Below is a popular comparison of gross domestic product (GDP) and the stock market, using the Wilshire 5000 Index.

Below is the percentage change on a year-over-year basis for both the GDP and the Wilshire 5000 Index.

Below is an expansion of the GDP relative to the Wilshire 5000. 

Perception versus Reality

In the first example, it appears that GDP run on a smooth incline from left to right with marginal variability while the stock market gyrates wildly.  In the second example, the smoothness of the GDP is no longer present.  In addition, the GDP appears to be in a relative declining trend as time passes.  In the third example, there is more of a sense of the relative change between the two indicators.

Worth noting is the fact that in periods when the year-over-year data on the stock market went negative, as last shown in Q1 2019, the following recovery exceeded 20%, at minimum.  Currently, as reported by the Federal Reserve Bank of St. Louis, we’ve seen an increase of approximately +12% from the Q1 2019 y-o-y low.

When comparing two disparate data sets, it makes sense to convert the data to the closest comparable numbers so that the comparison is as relative as possible.