AroniSmartInvest™ and AroniSmartIntelligence™ in Action: Analysis of Volatility of Stock Market Indices, Gold, Silver, and Oil vs Treasury Yield as of mid-Q3 2023

Q3 2023 is pushing forward. After a period with complex dynamics, Q3 2023 has been experiencing an upward momentum.  Year 2022, during which the stock market experienced major dynamics, mostly with historical randomness and a downtrend rollercoaster, saw the  major upbeat sentiments and performance observed in 2021 almost washed out. Year 2023 started with an upbeat sentiment, before experiencing the trends, volatility and seesaw movements observed in 2022, especially in late Q1 2023 and in Q2023.   Now, more than a month within the quarter and as Q3 2023 progresses, most of the key market indices have been recovering and going above the levels of the previous quarters.

Since 2022 and throughout  Q2 2023 the performance has, overall, significantly been impacted by the Federal Reserve's monetary policy regarding inflation, the continued uncertainty on the Chinese economic policies, worries of recession, and Ukraine war.  The impact of the COVID-19 pandemic new variants that impacted 2022 appears are  no longer existent in Q3 2023. As expected by  economists and most major banks,  the Federal Reserve has  slowed down in raising the interest  rates.   The  new important factor  that had worsened the fears has also been put behind. In fact, the collapse of the Silicon Valley Bank (SIV) and Signature Bank (SBNY)  in the US,  followed by the  failures of Credit Suisse in Europe and the First Republic Bank are no longer much in the news and hence appear to no longer impact the market sentiment.  Hence, like in Q1 2023, the stock market continues to be resilient, with key major indices remaining in positive territories. 

So far, the interest rate has been raised  ten times, from 0.25% to 5.00%, with the aggressive 75point raise in June, July, September and November 2022 and 50point raise in December 2022.  The latest raises were 25point in Feb, March, and May 2023.  The interest raises have pushed borrowing costs to highs since 2008.  The Federal Reserve has kept the option to  continue to raise the target range for the federal funds over the year, as the inflation persists, but by smaller steps and not as regularly.

These changes have negatively impacted all the market indices, as the Treasury Yield 10 Years (^TNX) continued to increase until early march, before declining towards the end of Q1 2023 and then increasing again in Q2 and early Q3 2023.

Hence the current analysis has focused on the Treasury Yield vs. the market indices, in general.

AroniSmart™ team, leveraging the Machine Learning Time Series capabilities, including Support Vector Machine, and Neural Network Analysis of AroniSmartIntelligence™ ,  has analyzed the trends of key stock market indices (DJI, NASDAQ,  S&P 500, Russell 2000, Oil, Gold)  between  mid -July  2022 and  mid-July  2023 and came up with insights and  projections on the dynamics.  

The analyses produced the different measures of forecasting accuracy, including  directional accuracy of Stock market indices. Directional accuracy is an important statistic when ones tries to look at the prediction of a given stock market index  vs others and key selected stocks, for example, as in this case, the Treasury Yield Adjusted Closing Price as a function of other stock market indices, Gold,  Silver, and Oil.

Indices Momentum?

All indices experienced an upward momentum  since January 4, 2023: Dow Jones (.DJI) had grown by 6.31% to 35,227.79; S&P 500  (.INX) by 18.62% to 4,436.34;  Nasdaq Composite (.IXIC) by 35.66% to 14,090.80; Russell 2000 Index (RUT) by 11.26% to 1,960.26, Crude Oil by 2.48% to 76.68 and Gold by 7.75% to 1,963.30. The Treasury Yield has increased by 1.18%.

Since the beginning of Q2 2023,  the Treasury Yield has increased by 11.87%.  Like the Treasury Yield  all indices have been increasing:   Dow Jones (.DJI) has  increased  by 4.84%; S&P 500  (.INX) increased by 10.1%;  Nasdaq Composite (.IXIC) increased by 15.12%; Russell 2000 Index (RUT) increased by 8.76%, Crude Oil decreased by 4.6% and Gold decreased by 0.10%. The 

Hence, although the dynamics  of all the stock indices appear aligned  and consistent with the Treaty Yield, there appears to be some significant  differences in the details, with each index factoring the dynamics unique to the sectors dominating its specific composition.

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Similar Trends with  Differential Nuances.

AroniSmart™ team  analyzed  stock indices performance dynamics, leveraging the  Econometrics and Time Series Support Vector Machine  and  Neural Network Multilayer Perceptron  capabilities  of  AroniSmartIntelligence™ and Machine Learning and Sentiment Analysis of AroniSmartInvest™. The team uncovered interesting insights, as shown below. The team analyzed the performance of  Dow Jones (.DJI), S&P 500  (.INX),  Nasdaq Composite (.IXIC), Russell 2000 Index (RUT) Adjusted Close vs  Adjusted Close of the other indices ( Crude Oil,  Silver, and Gold) and key selected stocks  from  July 21, 2022 to July 21,  2023.

From the analysis, it was confirmed as before that these indices and the Treasury Yield basically follow similar trends. Also, they are all similarly impacted by the market conditions. However, the analysis found important nuances. 

The key findings highlight:  the indices studied had an upward momentum over most of the period. Trend-wise, in late Q2- early Q3 2023, the stocks  reached  high price levels.  This followed different dynamics in Q1 2023-Q2 2023, when  the dynamics pointed to a slow down, downward trends, seesaw movements, and there were major speculations about a potential correction, recession, and other factors fueling uncertainty.

Figure 1: Key Indices Price Trends - NASDAQ, DJI, Treasury Yield    in July 2023-July 2023.

Figure 2: Key Indices Price Trends - Gold and Crude Oil  in July 2022-July 2023.

Figure 3: Key Indice Price Trends - SP500, Russell, Gold   in July 2022-July 2023.

Figure 4: Key Stocks Indices Trends  in April 2023- July 2023 -- Treasury Yield  Training Data model.

Figure 5:  Key Stocks Indices Trends  in April 2023- July 2023 -- Treasury Yield  Test Data model..

Over 2022 all the stocks indices built on an earlier momentum, almost following similar trends.  

By  end of  Q1 2023  most indices were below the  average Q4 2022 levels. The Treasury Yield was still increasing. In Q2 2023,  all indices momentums were significantly impacted by the market conditions. In late April 2023, they started bounced back, however with increased volatility. They  faced high volatility until late June 2023 (see charts below). Since then, the indices have been experiencing positive dynamics.  Similar market conditions, including the reduced fears of recession, the declining inflation, the job market,  the easing of rate increase positively impacted all indices. As expected, the Treasury Yield has been fueled by the last economic policies and decisions and has impacted the Market Indices (see chart  examples below).

Figure 6: Treasury Yield  Training Data Step Projection August 2023 - March 2023

Figure 7: Treasury Yield Trends and AroniSmart Testing Data Step Forecast Analysis Between April 2023 and July 2023

Figure 8 : Market Trends and AroniSmart  Key Stocks Indices Trends  Analysis Between July  2022 and July  2023

AroniSmartIntelligence™ modelling shows the stock indices that  appear to mirror each other: a high opening for  the stock market indices that tend to lead a decline or slow down in  Treasury Yield's adjusted closing price and a high opening for  the  stock market indices that tends to lead an increase or growth in  Treasury Yield's adjusted closing price.  Late Q4 2022 - Early Q1 2023 and late Q2- early Q3  dynamics appear to positively impact NASDAQ Index, whereas the end of Q1-early Q2 2023 appear to have been challenging.

AroniSmartIntelligence™ analysis, using Time Series Support Vector Machine modelling and Neural Network Multilayer Perceptron,  below, shows the weights of the different indices and the forecast statistics.  From the statistics, directionary accuracy is in general high, pointing to overall similar dynamics across all market indices.

AroniSmartLytics™ Neural Network Analysis  confirms Time Series Support Vector Machine results:   NASDAQ, SP500, and DJI, RUSSELL  momentum negatively impacted in  Q1 2023 - early Q2 2023, generally aligned with the momentum of most of other stock market indices. Treasury Yield and Gold Index have maintained the momentum, while  Crude Oil Index has been on a decline.

AroniSmart™ team  analyzed DJI's performance dynamics using Neural Network Analysis  capabilities  of  AroniSmartIntelligence™ and uncovered  insights confirming the performance dynamics of  Treasury Yield  vs   market indices  from  July 2022 to July 2023.

See below:

 Figure 9-a:  Treasury Yield Dynamics - AroniSmart Neural Network Analysis Results - Model setup and network  for the Period  Between July 2022 and  July 2023

 Figure 9-b:  Treasury Yield Dynamics - AroniSmart Neural Network Analysis Results - Weights  for the Period  Between July 2022 and  July 2023

 Figure 9-c:  Treasury Yield Dynamics - AroniSmart Neural Network Analysis Results - Network  for the Period  Between July 2022 and  July 2023

AroniSmartInvest ™ Analysis on some stocks confirms Support Vector Machine results: Stock Indices  momentum impacted in 2022-2023 and generally aligned with the momentum of most of other stocks.

ore detailed analyses can be conducted using AroniSmartIntelligence™ Big Data, Machine Learning, Time Series and Sentiment Analysis capabilities.

For  more on AroniSmartIntelligence and AroniSmartInvest capabilities, visit AroniSoft web site by clicking here. AroniSmartInvest™ and AroniSmartIntelligence ™ are available on Apple's App Store.

©2023 AroniSoft LLC

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