Feb 28, 2023
Each day in our Sector Snapshot, we provide updated charts of the relative strength lines of each sector versus the S&P 500. Outside of a brief period last summer, Technology, the largest sector in terms of market cap, has seen its relative strength line sit in negative territory for nearly the whole of the past year. In other words, the broader market has outperformed the Tech sector almost every day for a year straight. In the chart below, we show the one-year relative strength line of Tech versus the S&P going back to 1991. After some of the most dramatic underperformance of the past couple of decades, Tech rebounded, and the sector has now only underperformed the broader market by a little less than 3% in the past year. While Tech’s relative strength is not as weak as it once was and is closing in on the first positive readings since the mid-summer, today marks the 131st trading day of consecutive negative readings. That is handily the longest streak in nearly a decade and one of only six other times a streak has eclipsed 100 trading days.
The current streak has yet to come to a close, but in the chart below, we show the performance of Tech and the S&P 500 following the conclusion of each of those prior streaks of 100 or more days. Overall, performance does hold a positive bias with positive returns a vast majority of the time. That being said, the average size of those gains is not exactly impressive. In the case of Tech, the average and median gains are smaller than the norm across these time periods. One year out is the starkest difference with an average gain of less than 5% compared to what has typically been a gain that sits in the mid-teens. Likewise, the S&P 500 tends to underperform the norm one year later, but short to medium-term performance is stronger than the norm. Six-month returns, in particular, have been impressive with a move higher every time and an average gain that is more than double that of the typical six-month performance since 1991. Click here to learn more about Bespoke’s premium stock market research service.
Feb 27, 2023
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a decile breakdown of today’s price action based on analyst estimates, operating margins, 2022 performance, and short interest (page 1). We then check in on 60-40 portfolio returns (page 2). Switching to macro data, we provide a look at the latest manufacturing orders figures (page 3) followed by a final update of our5 Fed Manufacturing Composite (page 4).
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Feb 27, 2023
On Saturday, Warren Buffett’s annual letter to shareholders of Berkshire Hathaway (BRK.B) was posted. Amidst commentary on stock buybacks and a brief discussion of the company’s performance in 2022, the letter did not have any explosive market-moving news or commentary. As a result, price action today has been relatively uneventful. That same sort of sleepy price action also applies to the past few months. Overall, the Oracle of Omaha’s company has been treading water since last fall with a flat 50-DMA and 200-DMA to boot.
Although BRK.B is trending sideways over the past few months, looking back since the start of last year, the stock has performed remarkably well. As shown by the relative strength line below, strong performance in early 2022 (as the equities began to enter a bear market) led BRK.B to massively outperform the S&P 500 (SPY). Although still outperforming, the pattern at the start of this year has been the polar opposite of last year. Given equities have broadly rallied and Berkshire has been rather stagnant, the stock’s relative strength has taken a sharp turn lower headed into this weekend’s letter and the annual conference coming up in a few months.
In the table below, we break down the performance of the company’s b-shares after the release of Buffett’s annual letters. Again, the stock’s reaction today has been a bit muted, with the flat move lower than the historical average of a 0.54% gain. Going forward, performance has been mixed. While one week and one month out from the letter have averaged gains and positive moves more than half the time, three months later has seen BRK.B fall more than half the time. From there, consistent with what has tended to be Mr. Buffett’s optimistic long-term view, performance has tended to be more consistently positive with a move higher nearly two-thirds of the time one year later for an average gain of 13.7%. Click here to learn more about Bespoke’s premium stock market research service.
