May 16, 2022
In an earlier post, we noted the dramatic underperformance of IPOs in the past year using the Renaissance IPO ETF (IPO) as a proxy for newly listed companies. One downside of using the IPO ETF is that it only began trading in 2013. To get a gauge on IPOs going further back, below we have created an index using the Bloomberg IPO index starting in August 1994 through October 2017 when it was discontinued, then switching to the performance of the IPO ETF in the time since then. The two measures of IPOs are not perfectly like for like given differences in methodology (for example, the Bloomberg index only tracked companies that debuted in the past year versus three years for IPO), but combining the two still helps us compare the current drawdown versus prior ones dating back to the early 1990s.
Since peaking with the rest of the most aggressively valued stocks in early 2021, IPOs as a group are in a 60%+ drawdown! While we’ve seen multiple drawdowns of at least 30% for IPOs over the years (during the Financial Crisis, the late 2018 sell-off, and the COVID Crash), the current drawdown has been bigger than any period except for the Dot Com bust from 2000-2002. In case you weren’t aware of how painful the declines have been in “growth” areas of the market like IPOs, one look at the second chart below should do the trick. Click here to learn more about Bespoke’s premium stock market research service.
May 16, 2022
It has now been over a year since the Renaissance IPO ETF (IPO)—an ETF tracking a basket of the largest and most liquid stocks that recently debuted—peaked in February 2021. While it then trended sideways through last fall, IPO has been on a one-way trip lower since. Currently, the ETF is down over 57% versus its 52-week high in September. In that same time, the Russell 3,000 is down only around 12%. As shown in the second chart below, IPOs saw a massive string of outperformance from mid-2020 through early 2021, but the past year has erased any and all of that. In fact, the ratio of IPO to the Russell 3,000 has in the past couple of weeks collapsed to record lows going back to late 2013 when it began trading.
Not only are recent IPOs generally performing poorly, but issuance itself has also dried up. Below we show the average number of IPOs over a rolling 3-month span since 1990. The post-pandemic period saw an explosion of IPOs with the average deal count actually surpassing that of the 1990s or the similarly high reading leading up to the financial crisis. This year, that count has fallen sharply and is currently right back in line with the historical average. Click here to learn more about Bespoke’s premium stock market research service.
May 16, 2022
May’s first reading on regional manufacturing activity out of New York showed significant deterioration. The New York Fed’s Empire State Manufacturing survey’s headline index dropped from a solid reading of 24.6 last month down to -11.6 in May. That is only slightly above the low from two months ago that had marked the first significant contraction in activity since the spring of 2020.
Not only are General Business Conditions back into contractionary territory, but the double-digit negative reading sits in the bottom decile of all months on record going back to the start of the index in 2001. That compares to last month’s reading which was just shy of the top decile. Given the total reversal within the historical range, the month-over-month decline of 36.2 points is now the second-largest one-month drop on record behind the 56.7 point decline in April 2020.
Only New Orders and Shipments fell enough to reach contractionary levels this month, but most other categories also saw large month-over-month declines. Expectations similarly saw broad declines, however, the categories that saw the biggest deteriorations in current conditions (General Business Conditions, New Orders, and Shipments) saw improvements in six-month expectations.
As previously mentioned, the most shocking declines were in demand-related categories, namely New Orders and Shipments. These two indices fell by 33.9 and 49.9 points, respectively. For New Orders, that was the third-largest decline on record outside of the 56-point drop in April 2020 and a 43.1-point decline in the wake of September 11, 2001. The only larger decline in Shipments happened, again, in April 2020. Unfilled Orders also fell dramatically, though the month-over-month decline was not as close to a record, and the actual level of the index is still relatively elevated in the top quartile of its historical range. Although more New York area firms reported declines in new orders and shipments, expectations were each higher month-over-month following sharp declines leading into this month’s report.
Perhaps in part due to that slow down in demand, Delivery Times continue to decelerate with the index dropping another 1.6 points. That follows a much larger double-digit decline in April. In what could be either a positive sign as a result of finally alleviated supply chains or a negative sign given slowing demand, responding firms also reported that they expect delivery times to finally decline in six months. That was the first negative reading in expectations since October 2020.
Additionally, inflationary pressures appear to be easing as both indices for Prices Paid and Received declined across current conditions and 6-month expectations. Those declines are only small dents in what have been extremely strong runs over the past two years.
Perhaps the only silver lining in this month’s report was in regards to employment. New York area firms accelerated both net hiring and the average workweek. Again though, expectations were less optimistic as those indices continue to roll over alongside plans for Technology Spending and Capital Expenditures. In other words, the employment situation may have improved in May, but that is not expected to improve dramatically in the months ahead as demand has weakened. Click here to learn more about Bespoke’s premium stock market research service.
May 13, 2022
Bespoke’s Crypto Report contains numerous technical, momentum, and sentiment charts for bitcoin, ethereum, and other key cryptos. Page 1 of the report includes our weekly commentary on the space and attempts to identify any new trends that are emerging. The remaining pages include important overbought/oversold levels to watch, charts on historical drawdowns and rallies, seasonality trends, futures positioning data, Google search trend shifts, and more. Our weekly Crypto Report is produced so that followers of the space can more easily stay on top of price action, technicals, seasonality, and sentiment.
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