This assignment gives you the opportunity to observe and explain the (percentage) change in the value of the S&P 500 between May 17, 2021 and July 10, 2021. Write a (maximum) six-page, double-spaced, paper – excluding tables, appendices, and reference list – explaining why this index either increased or decreased in value during the period. Please note: This assignment should be written in the form of a “paper” (or a magazine article or opinion column). Items A. to F. (below) identify questions/issues you should think about when writing this paper. However, you should not just answer these questions on a one by one basis. Indeed, depending on what happens during the defined period, some of the items will be more important and some will be less important (or maybe not important at all!). Make your paper interesting!
A. Obtain the closing value of the S&P 500 (and the trading volume) for each day from May 17, 2021 and July 10, 2021. Include a list of this data either in a table or as an appendix to your paper.
B. What was the percentage change in the S&P 500 during this period? How volatile was the index? What specific days appear to account for the majority of the change (or volatility)? What was the trading volume on those days? (This information may or may not help you identify the most important events).
C. What are the primary macroeconomic factors (or themes) that appear to account for the majority of the observed price change (or volatility)? Please note that business reporters are paid to write daily articles about the stock market and these articles identify reasons for the observed price movements every single day (and the reporters try to make these reasons sound important, even if they are not). Do NOT just list the reasons reporters say that the market increased or decreased on a day-by-day basis. If the market increases or decreases by, say, 15 percent over this period, it is likely (but not necessarily certain) that this change can be attributed to one or two primary macroeconomic themes/shocks.
D. What are the main factors that contributed to market uncertainty during this period? Were any of these issues “resolved” during this period? (To gain perspective on how the market moved between May 17, 2021 and July 10, 2021, you might want to briefly discuss market movements over the past year). What does the market activity during this period portend for the future?
E. Try to link your discussion of stock price movements during the observation period back to the textbook. Are stock prices really the present value of expected future cash flows? If so, how did the news items you discussed cause investors to adjust future cash flow estimates? Did the market movements over this period conflict with the concept of market efficiency, or were these price movements consistent with what one might expect in an efficient market?
F. If you use quotes or paraphrase material from other sources, these sources should be included on a reference list. Also, if you provide detailed descriptions of news events, you should reference the article from which you obtained the information.
