Sentiment Staying Bullish
The S&P 500 has continued its rally but sentiment has not exactly reflected that. The latest reading on investor sentiment from the AAII survey showed bullish sentiment dropped back below 50% this week. 44.5% of respondents reported as bullish in the past week which is right in line with the average reading of the past two months.
The 6.5-point decline in bulls was only partially picked up by bearish sentiment which rose from 21.5% (the lowest level in over two years) to 24.1%. Albeit higher sequentially, that remains a muted reading.
Neutral sentiment took home a larger share of the drop to bulls with the reading rising to 31% from 27.1%. That is only the most elevated reading in two weeks as neutral sentiment is the closest of any response to its respective historical average.
While the AAII survey showed some moderation in optimism this week, that was not the case for other surveys. In last Thursday’s Closer, we discussed how alongside the AAII survey, multiple other sentiment readings have tipped in favor of bulls recently. One such indicator that has continued to become more bullish is the NAAIM Exposure index which tracks the average equity exposure of active investment managers. Readings range from -200 to +200. -200/+200 would imply on average money managers are leveraged short/long, readings of -100/+100 would be fully short/long, and a reading of zero would be market neutral. This week the index tipped above 100 for the first time since late November 2021. In other words, active money managers are now fully long for the first time in over a year and a half. That streak of readings below 100 also ends as the fourth longest in the survey’s history at 86 weeks in a row.
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Jobless Claims Back to Improving
It was a solid morning for economic data with a number of indicators coming in better than expected. Weekly jobless claims were one of those with seasonally adjusted initial claims unexpectedly falling to 221K from 228K last week and the lowest level since the second half of February.
Before seasonal adjustment, claims fell significantly week over week as could be expected for this point of the year. The 44.5K drop this week was in line with the average historical drop for the current week of the year as claims have fallen 80% of the time. Going forward, there will continue to be seasonal tailwinds through the end of summer before the typical fourth quarter turn higher.
As for continuing claims, the seasonally adjusted reading likewise hit a new short-term low coming in at just 1.69 million. That is the lowest reading and first sub-1.7 million since the end of January. Combined with the initial claims reading, this recent data points to a return to strength in the labor market data following deterioration late last year through the early spring.
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Where the Jobs Were
In last night’s Closer, we discussed the latest job postings data from job listings website Indeed. Compared to the official reading on labor market demand — the Job Openings and Labor Turnover Survey (JOLTS) — which is released monthly at a two-month lag, this Indeed data is a daily look with much lower latency. The latest release as of Tuesday covers postings through July 21st. As shown below, postings remain in a downtrend in spite of a modest rebound in the latest month. Having tracked well with the official data, modeling JOLTS on the Indeed data would predict JOLTS to continue to fall to around 9.57 million for the June data scheduled to be released next week.
The Indeed data also provides a good deal of demographic granularity based upon geographic areas. As shown below, the first two years of the pandemic had been a boon for smaller metro areas as they generally saw healthier readings on postings than the largest cities. While that dynamic moderated through the back half of 2021 through early 2022, the past year has seen the trend return. As shown in the charts below, postings have fallen regardless of MSA size, but larger metros have experienced a much more substantial drop. The smallest metros, on the other hand, have seen a much more modest decline, especially over the past several months. Check out the big drop in the second chart below showing the spread between the largest and smallest metros:
The data also provides a breakdown based on job industry. In the table below, we show the change in each industries’ postings since the pre-pandemic baseline of early February 2020. Currently, there are six groups with a lower reading on postings versus pre-pandemic: IT Operations & Helpdesk, Media & Communications, Marketing, Information Documentation and Design, Software Development, and Mathematics. Meanwhile, several health care and engineering related roles continue to sit atop the list with the greatest post-pandemic growth in job postings. Finally, we would also note that some industries like Human Resources and logistics-related industries that saw postings boom on account of strong hiring and stressed supply chains have moderated. Today, those same indices now have postings that are middle of the pack at best.
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Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.
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The Closer – EVs, Metaverse, and Earnings, FOMC, New Home Sales – 7/26/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start with a look at the news from auto manufacturers and a number of notable earnings reports (page 1) followed by a rundown of the FOMC meeting and subsequent market reaction (page 2). We then turn to the latest new home sales data (page 3), EIA petroleum inventories (page 4), and Indeed job postings (pages 5 & 6).
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