Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.
With the escalation of tensions in the Middle East, the likelihood of oil prices skyrocketing has once again increased, and oil traders are buying call options.
According to data, Brent crude oil call option contracts traded over 0.3 million on Wednesday, the largest single-day trading volume since the regional tension escalated in April. The trading volume is mainly dominated by large bullish option spreads, including $87 and $90 spreads for October, as well as $110 and $130 spreads for November. As of press time, Brent crude oil is traded around $81.
The oil market has been paying attention to the region because of concerns that conflicts between Israel and Iran, as well as conflicts between Iran-backed proxies in Gaza, Lebanon, Yemen, and other places, may escalate, endangering oil supplies. The latest driving factor is the assassination of senior leaders of Hezbollah and Hamas, the latter of which was attacked in Iran. Iran accused Israel and vowed to retaliate.
On Wednesday, Brent crude oil prices soared 2.7% to the highest level since October last year, and WTI crude oil prices surged 4.26%. The implied volatility has rebounded from its low level. Meanwhile, the so-called option skew now also favors call options, reflecting increased market risk.
Vivek Dhar, an analyst at Commonwealth Bank, said in a client report, "There is reason for the oil market to worry that the assassination of senior Hezbollah leader Haniyah will make Iran more directly involved in a war with Israel. This may put Iran's oil supply and related infrastructure at risk."
The analyst added that the market will be concerned about Iran's ability to escalate tensions by controlling the Strait of Hormuz. "Blocking this key waterway would threaten the transportation of 15-20% of global oil supply. As the capacity of backup pipelines bypassing this blockade is limited, the Strait of Hormuz has become a major potential interruption risk for the oil market," Dhar said.
Call options give holders the right to buy assets at a specific price on a specific date or before. If oil prices soar above $100, traders who own options below that price will get a return. For consumers, this can protect them from the impact of price increases.
Another bullish news for oil is that the US Energy Information Administration (EIA) reported on Wednesday that US May oil demand reached a record seasonal level (20.8 million barrels per day), higher than EIA's previous expectation of 20 million barrels per day for May.
Eric Nuttall, senior portfolio manager at Ninepoint Partners, said that global oil inventories are in a downward trend, creating a record deficit relative to their average level.
Amidst oil price fluctuations, a highly influential technical committee of OPEC+ is scheduled to meet on Thursday to assess production quota compliance among its members. While this joint ministerial monitoring committee does not have the authority to adjust OPEC+'s formal output strategy, it can convene a comprehensive ministerial meeting to make adjustments if market conditions require it.
Compliance with quotas has been reviewed by the organization, and on July 24, the OPEC Secretariat noted that OPEC+ members Iraq, Kazakhstan, and Russia have notified the organization that they plan to further reduce production between July 2024 and September 2025 to offset excess production in the first half of the year.
Nuttall pointed out that the improvement in OPEC+ compliance with production cuts is a bullish factor for oil prices.
The rise in oil prices remains to be seen.
However, some analysts have questioned whether the recent escalation of the conflict will support oil prices in the long term.
Tamas Varga, an oil analyst at PVM Associates, said, "I think the fact that the assassination happened on Iranian territory increases the risk and danger of actual supply disruptions, so oil prices rise."
"Having said that, I think the support (provided by this event) will not last unless further escalation clearly threatens actual output in the region."
Giovanni Staunovo, an analyst at UBS Group, agreed with this. He said, "Concerns about the escalation of the Middle East tension pushed up oil prices. That is to say, the geopolitical risk premium of oil will only continue in the event of supply disruption. The oil price reaction is mild because there has been no supply disruption so far."
Editor / jayden