The Closer — Peso Intervention, State of Homeownership — 2/21/17

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Looking for deeper insight on global markets and economics?  In tonight’s Closer sent to Bespoke Institutional clients, we take a look at the large intervention announced today by Mexico’s central bank and review annual vacancy and homeownership rates by state.


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Oil Volatility Plummets

Much has been said about the drop in volatility that we’ve seen for equities, but we’ve also seen a big drop in vol for oil.  You can see the tight sideways pattern that oil has formed over the last few months in the chart below:


Over the last 50 trading days, oil has averaged an absolute daily change of +/-1.2%.  That’s significantly lower than where things stood last year at this time.  Below is a chart showing this reading on a rolling basis going back to 1983.  During oil’s big price collapse from late 2014 through early 2016, volatility spiked significantly.  In early 2016 when prices were about to bottom, oil had averaged a daily move of nearly +/-4% over the prior 50 trading days.

While the current reading of +/-1.2% is down sharply compared to a year ago, it’s still not close to the lows seen just prior to the peak for oil prices in late 2014.  Back then oil was seeing daily moves of just over half a percent.  Talk about a calm before the storm.




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US Bull Market Chugs Along

Below is an updated look at historical bull markets for the S&P 500 going back to its inception in 1928.  Remember, the standard definition of a “bull market” is a 20%+ rally that was preceded by a 20%+ decline.  We’ll leave the argument over what should or shouldn’t be considered a bull market for another day.  Here we’re only reporting the numbers.

As shown below, the current bull market that began on March 9th, 2009 has now lasted 2,906 days.  That makes the current bull the second longest on record by 299 days.  The only bull market that lasted longer was the one that ran from December 1987 through March 2000.  Remarkably, the S&P didn’t experience a decline of 20% on a closing basis over that entire 4,494-day period.

Another notable stat is that the current bull has now lasted more than 1,000 days longer than the previous bull that ran from July 2002 to October 2007.

In terms of strength, the current bull still ranks third best with a gain of 248.96%.  To move into second place, the gain will need to eclipse the 267% rally seen from June 1949 through August 1956.

In case you’re wondering, the shortest bull market on record lasted just 24 days — occurring all inside the month of June 1931.




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2017 Commodities Performance

Below is a look at the performance of major commodities so far in 2017.  As shown, silver is up the most at +12.5%, followed by platinum (10.4%), copper (10.0%), and coffee (9.4%).  On the downside, natural gas has been by far the biggest loser with a drop of 29%.  Orange juice is down the second most at -9.3%, and oil is just barely in the red with a decline of 0.9%.


Below is a look at one-year price charts for oil, natural gas, gold, and silver.  As shown, oil is right in the middle of what has become a very tight range, while natural gas has moved into extreme oversold territory.  As of this morning, natural gas was trading more than two standard deviations below its 50-day moving average.  Both gold and silver have recently moved to the top of their trading ranges, having recently broken above the top of their multi-month downtrend channels.




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Best and Worst Performing Stocks Since the Inauguration

It has now been one full month since Donald J. Trump was inaugurated as President, and you may recall that the general consensus after the big post-election rally was that investors should “buy the Election and sell the Inauguration.”  Even though the ‘buy’ part of the strategy was never mentioned until early January – well after the market rallied in November – the consensus trade was that all of the gains pre-Inauguration were being borrowed from the future and that investors would sell the news after Trump was sworn in.  It has only been a month, but so far the strategy hasn’t quite panned out.  Since Inauguration Day, the S&P 500 is up 3.3%, while the average performance of the 500 stocks in the index is even better at +3.6%.

In the tables below, we provide a brief summary of the S&P 500’s biggest winners and losers during the first full month under President Trump.  The first table below lists the 25 biggest winners over the last month.  Leading the way higher is Arconic (ARNC), which thanks to an activist investor, is up over 40%.  Behind ARNC, Seagate Technology (STX) is the only other stock up more than 20%.  Other notable names on the list include Apple (AAPL) and Cisco (CSCO).  In terms of sector representation, it was surprising to see relatively few stocks from the Financials (3) and Industrials (4) sectors as they have been considered to be among the biggest winners under a President Trump.  On the flipside, the sectors with the greatest representation are Technology and Health Care, each with six stocks.  Both of these sectors did poorly on a relative basis to close out 2016, but investors have started coming around to them regardless of the President’s not-so-positive-relationship with the sectors.

S&P 500 Best Performers Since Inaugusration

To the downside, 117 stocks in the S&P 500 are down since the Inauguration, and below we list the 25 worst performers.  Under Armour (UAA) has been the worst stock by far, losing close to a quarter of its value.  Behind UAA, eight other stocks are down 10%, including other consumer names like Mattel (MAT), Ralph Lauren (RL), and H&R Block (HRB).  In fact, Consumer Discretionary stocks have been especially hard hit under President Trump with eight of the worst 25 performers.  Likewise, even though he has promised to decrease regulation and ease drilling restrictions, eight stocks from the Energy sector also made the list of 25 biggest losers.  Perhaps there will be just too much oil coming out of the ground.  One sector conspicuously absent from the list of biggest losers is Financials.  While they may not be ripping under President Trump, Financials also haven’t been under pressure by any stretch.

S&P 500 Worst Performers Since Inaugusration



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S&P 500 Sector Weightings

Below is a look at current S&P 500 sector weightings using GICS standards.  As shown, Technology’s weighting now stands at 21.53%, making it the biggest sector by a wide margin.  The Financial sector is the second largest with a weighting of 14.8%.  Remember, though, that the REITs were recently given their own sector, which lowered the weighting of the Financial sector by over two-and-a-half percentage points.  If the Financial sector still contained the REITs, its weighting would be 17.6%.


Below is a look at the change in sector weightings since Election day last November 8th.  As shown, the Financial sector has seen the biggest jump by far at 1.4 percentage points.  The only other sector that has seen a meaningful jump is Industrials (+0.20 percentage points).  On the downside, we’ve seen Consumer Staples, Energy, Health Care, Utilities, Real Estate, Telecom, and Consumer Discretionary all lose share since election day.


If we look at changes in sector weightings so far in 2017, things look quite different versus the change since Election day.  Since the start of 2017, the Technology sector has seen the biggest jump in its weighting at 0.76 percentage points.  The Consumer Discretionary has seen the next biggest jump at 0.17 percentage points.

While the Financial sector has seen the biggest jump in weighting since Election day, it has actually lost share since the start of the year.  So all of its post-Trump gains in share came in 2016.




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ETF Trends: US Indices & Styles – 2/21/16

The TAN Solar ETF has been the best performer of the past week among ETFs we track, joining Coffee as a surprising name atop the big winners list. Biotech and Pharma have both legged higher while Brazil and Israel are both delivering strong trailing returns. At the sector level we’ve got Staples and Financials as the leaders. On the losing side, Natural Gas and Southeast Asia (Indonesia, Philippines) are at the top of the list while a number of other commodities also have weak trailing returns.

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Bespoke Brunch Reads: 2/19/17

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week.  The links are mostly market related, but there are some other interesting subjects covered as well.  We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

Baby Boomers

With $15 Left in the Bank, a Baby Boomer Makes Peace With Less by Timothy W. Martin (WSJ)

The aging Boomer cohort is no stranger to debt, a financial strategy which leads many of those later in life to cut it close during times of economic stress. [Link; paywall]

Boomers stuck in a circular unfunded liability they will never break out of… by Deux Et Vingt (Macro Ramblings From the ‘Burbs)

Are low interest rates and high stock prices all the same trade, driven by a massive cohort that is desperately trying to save enough for long retirements? [Link]


Hot, Sticky, & Sweet by Keaton Lamle (Bitter Southerner)

The culture and iconic status of fried dough with a sweet topping in across the South. [Link]

International Relations

How Serious Is the Threat to Global Financial Stability From a Border-Adjustment Tax? by Brad Setser (Council on Foreign Relations)

Regardless of its impact on the domestic economy (which is hotly debated as Senators start to line up against the House’s preferred tax reform proposal), a BAT could have significant repercussions across the global economy purely thanks to its financial markets effects. [Link]

About Face: A History of America’s Curious Relationship With China, From Nixon to Clinton by James H. Mann (Foreign Affairs)

Only Nixon could go to China, and this week marked the anniversary of that remarkable pivot in US foreign policy during the Cold War. [Link]

Strange News

Blackstone CEO throws himself ‘the party of the century’ by Emily Smith (Page Six)

Camels, Mongolian greeters (???), a custom-built temple, Gwen Stefani, and the celebration of Stephen Schwarzman’s birthday party in Florida. [Link]

Howard Stern Sued for Broadcasting Woman’s Conversation With IRS by Eriq Gardner (The Hollywood Reporter)

Does broadcasting 45 minutes of an IRS agent’s call with a taxpayer make for good radio? We doubt it but that didn’t stop Howard Stern from airing it in 2015 and he’s now getting sued. [Link; auto-playing video]

Real Estate: The Good, The Bad, and The Ugly

How Resilient Is the U.S. Housing Market Now? by Andreas Fuster, Eilidh Geddes, Benedict Guttman-Kenney, and Andrew Haughwout (NY Fed Liberty Street Economics)

A comprehensive review of the fundamentals of the housing sector, from LTVs to delinquency at both a national and regional level. [Link]

Mortgage Rates Monday, Feb. 13: Higher; Lower-Credit Borrowers Discouraged by Deborah Kearns (Nerdwallet)

Much of the post-crisis improvement in mortgage applicant FICO scores is due to low-score borrowers not bothering to apply for loans in the first place. [Link]

Are gains in black homeownership history? by Laurie Goodman, Jun Zhu, and Rolf Pendall (Urban Institute)

After years of improvement in the lower rate of homeownership amongst blacks, gains started to reverse in the early 1990s and have dramatically underperformed other cohorts. [Link]


Dopamine Labs slings tools to boost and reduce app addiction by Jonathan Shieber (TechCrunch)

A new start up aims to use neuroscience to offer other app developers the key to hooking users, while trying to prevent PR disaster by also offering tools to reduce appdiction. [Link]

Defaults Slash Returns for Online Loan Investors by Peter Rudegeair (WSJ)

Rising defaults and interest rate increases are dragging down performance for the investment funds that feed capital into many online platform lending players. [Link; paywall]

Now Facebook wants to be your weather app by Michael Grothus (Fast Company)

As if we didn’t spend enough time collectively on Facebook already… [Link]

Elon Musk Is Really Boring by Max Chafkin (Bloomberg)

A traffic jam led Elon Musk to just start digging, thus reinventing an entirely not new form of transportation and earning himself a Blooomberg Businessweek cover. [Link]


Rob Arnott Says You’ll Be Sorry for Ignoring Smart Beta Warnings by Dani Burger (Bloomberg)

More sturm und drang about the risks of smart beta, which can lead to concentrations and correlation risk for investors. [Link]

Moments Of Truth

Oil Producers Promised Output Cuts. Here’s the Reality. by Brian Wingfield, Samuel Dodge and Hayley Warren (Bloomberg)

Some nice charts on the share of proposed cuts that have actually been met by both OPEC and non-OPEC nations following last fall’s deal. [Link]

It’s a Moment of Truth for U.S. Companies by Oliver Renick (Bloomberg)

With sentiment indices surging, is now the time corporate capex will finally start to accelerate? [Link; auto-playing video]


U.S. flight cancellations, baggage problems fall to historic lows by David Shepardson (Reuters)

In a rare bit of good news, airlines cancelled 1.17% of flights (a new record) and mishandled only 2.7 pieces of baggage per 1000 passengers. [Link]


The Rise and Fall of a K Street Renegade by Brody Mullins (WSJ)

The massive lobbying success, free-wheeling spending, and tragic downfall of a man that re-wrote the rules for corporations’ efforts to grab Washington’s attention. [Link; registration required]

Le Pen is on course to be France’s next president, fund manager says from AI analysis by Everett Rosenfeld and Nyshka Chandran (CNBC)

Le Pen’s poll numbers haven’t moved much but betting markets and some sort of “AI” (likely code for a series of linear regressions) are moving much more in her favor. [Link; auto-playing video]

GOP May Cap Insurance Tax Break as ACA Repeal Bill Nears by Anna Edney, Billy House and Arit John (Bloomberg)

One of the most interesting possible policy options we’ve seen so far around ACA repeal is the concept of corporate deductions on health care benefits, a source of significant distortion in US health care markets. [Link; auto-playing video]

Stephen Miller Is a ‘True Believer’ Behind Core Trump Policies by Glenn Thrush and Jennifer Steinhauer (NYT)

A profile of one of Trump’s closest – and most extreme – advisors. [Link; soft paywall]


Q&A: Melinda Gates on the World’s Missing Data About Women by Megan Murphy (Bloomberg)

An interview with one of the world’s biggest philanthropists where she focusses on the challenges of improving outcomes for women when there is so little data to assess the lay of the land. Also an interesting look at the Bill and Melinda Gates Foundation more broadly. [Link; auto-playing video]

Have a great Sunday!

The Bespoke Report — 2/17/17

The screen below is one of many graphics included in our just-published Bespoke Report newsletter (included weekly with all of our membership packages).  It shows the recent performance of various asset classes using our key ETF matrix.  Note that the Mexico ETF (EWW) is up more than any ETF in the entire matrix since Trump’s Inauguration on January 20th!

If you’d like to read our thoughts on recent performance plus the rest of this week’s Bespoke Report newsletter, take advantage of our one-month Bespoke Premium free trial offer that includes our 2017 Outlook Report.  Sign up now at this page.

Have a great weekend!





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