One of these things is not like the others…

Remember the Sesame Street ditty “One of these things is not like the others”. This little song was designed to help children determine differences in unique outliers patterns or groups. Being in my late 50’s, I grew up with the Sesame Street gang and its lessons during my childhood in the late 1960’s and early 1970’s. Little did I know that they were training me for a career in Technical Analysis of stock trends! Thanks, Jim Henson and gang! Today, we’re going to play the game of  “One of these things” to see if us adults can spot something that doesn’t fit in with the others. So – come and play along!

They say a picture is worth a thousand words. So, I should be able to keep this blog’s verbiage pretty short after we look at the picture below. The chart illustrates the S&P 500 going back to 1980, with the S&P 500’s earnings in the pane below. To help Cookie Monster (picture above) figure out which time period differs from the others, I have added some bright red arrows. So, kids, can you spot the anomaly (can you say “an-om-a-ly”?) where earnings went down, but the stock market STILL went up? First boy or girl who gets this right gets a gold star on their paper!


The closeup view on the chart above (right side pane) shows us the view going back to early 2020. Yes, little Sally and Johnny–that’s when “The Virus” appeared in Wuhan China. And that’s when earnings fell, along with the stock market, as people everywhere hunkered down and businesses were forced to close.  That made sense.

But wait… then something strange happened. For the first time in 40 + years – earnings remained low yet stock markets rose – strongly. Normally, the two move somewhat in tandem….

One of these things is not like the others…indeed.

BTW–I recorded a video at my cottage on the weekend (why not?) that attempts to answer the question of “How low can it go” regarding the recent bout of market volatility. That video should be posted by the end of the day on Monday June 21. Check the video webpage here to view the video when its posted.


  • Keith – what do you make of this in terms of what will happen next? Earnings went down because practically everything was shut down. People had no where to put their discretionary income so it seems they ploughed it into stocks. So that all makes sense. But does this foretell the stock mkt future in any way? I’m not sure. Looking across mkts – many stocks have been weakening since Feb….but indices are still close to ATH’s….so perhaps that signals we are due for more corrections?


    • Hi Jim – good question, and the answer is that there was a reason I did not do my usual “conclusion” paragraph at the bottom of the blog. To your point–its perhaps a little different this time…or…is it? COVID was a unique situation…or, was it compared to other unique situations? Eg–terrorist attack 2001, banking collapse 2008, great depression, etc, etc, ect…all unique, and yet..same results. I don’t have the answer. I do have a stock chart, though! And it shows us at least some correlation between the two most of the time…

      I will say that its generally not a great idea to argue with history ( in this case, the tendency for earnings to drive market performance)- instead, we should learn from history–and in this case, there has been a correlation between the two through history. I’m not a lover of cancel culture – especially with stock market history!!

      Breadth (per your observation) is one of the bearish indicators in my Bear-o-meter that pushed it into a high-risk reading early this month.

  • I agree the discrepancy is overdone but there is a case for the different this time side. The government is intervening with huge support, Baby Boomers are entering retirement in record numbers with less then adequate savings, interest rates are low so the no other choice plays a role, access to the market is much easier then the days of brokers only, and a general attitude of I want it now is becoming entrenched. Will it end in tears for many, probably, but I do see that paying somewhat higher multiples for strong companies makes some sense now.

    • Yes I will not argue with that. But it is, as you say, a matter of time before the tears flow. The hard part is guessing how much time before that happens….

  • Hey Keith,
    Do you look at the VIX as an additional indicator of when markets might fall? The VIX fell over 13% today, but it still seems a bit high relative to a range of 9-12, which I thought I had heard could be an indication of markets about to fall. I may be remembering incorrectly. Anyway, could you comment on the VIX and whether you consider its reading in your analysis of the markets correcting. If you have commented on this recently, maybe just direct me to the blog? Thanks

    • Hi Wendy–the VIX is like any other indicator–it is useful but not a signal by itself. Do a search on the blog and type in VIX and you will see plenty on it. We use it in my Bear-o-mter. It s use is discussed at length in my upcoming book Smart money, Dumb money (published in 2 weeks or so I expect)

  • Keith
    Do you know the concensus earnings estimate for the s and p 500 for this year and next?…….
    thanks Bruce…….

  • Hi Keith,

    I received your newsletter update the other day and you mentioned that you are scaling back on emerging markets. I thought emerging markets will do well in the longer view. Just curious why you are scaling back as I believe you said sometime earlier that emerging markets is a good long term trade at the time.

    • We still hold very specific emerging markets–but not long ago we sold a broad market EM ETF, along with the China tech ETF, and finally Chile ETF. All three have fallen since we sold them, and we are in no hurry to get back in. However, there are specific countries we do own and like for their exposure to specific commodities. Our client email noted them–but it was client – only info (we don’t give away all of our specific positions for both compliance and competitive reasons). The point remains, however, that are about 1/3rd exposed to EM as we were a month or so ago.

  • If markets are forward-looking – forecasting out by 12 months -, perhaps they’re predicting a huge ramp-up in EPS when the world reopens???

    BTW, Keith, the photo is NOT of Grover but of Cookie Monster! Grover is a green frog and Cookie Monster is the one who devours cookies. You’re great at technical analysis and trend identification but you need to work on your SS character identification!

    • Paula–the look-ahead to earnings is certainly the reason for the difference. I point it out because its an anomaly–but you are correct.
      Re Grover vs Cookie Monster–how dumb of me not to call the right name here–I mean, he even had cookies on plates, how obvious was that for me to miss???
      Fixing it.


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