Bespoke’s Morning Lineup – 9/5/24 – Mixed Jobs Data

Sep 5, 2024

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“Do right and risk the consequences.” – Sam Houston

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

The equity market weakness that kicked off September has continued into the third trading day of the month, but the magnitude of the losses has been restrained. In the fixed-income market, treasuries have gotten off to a strong start this month, but this morning, rates are little changed as the 2s10s yield curve has moved into positive territory…if you go out to four decimal places (0.0001%).

After some weak data to kick off the month and yesterday’s Beige Book, investors have returned to worrying over the state of the US economy. That means weak labor data will not be positively received from the equity market. The first of those labor reports was the ADP Employment report which showed monthly growth of just 99K relative to forecasts for an increase of 142K –  the smallest monthly increase since January 2021. That was the bad news. The good news was that initial and continuing jobless claims came in lower than expected.

In addition to those two reports, Non-Farm Productivity was in line with forecasts (+2.5%), and Unit Labor Costs rose just 0.4% versus forecasts for an increase of 0.8%. The only other reports on the calendar for today are PMI readings for the Services sector from S&P and ISM both of which are expected to decline slightly from their prior readings.

It may sound hard to believe, but with the S&P 500 now 2.6% off its mid-July high, long-term US Treasuries, as measured by the iShares 20+ US Treasury ETF (TLT), are closer to a 52-week high than the US stock market.  As shown in the chart below, TLT’s current 52-week high was back in late 2023.

The chart below shows the historical spread between TLT’s closing price and its 52-week high (on a closing basis), and as of yesterday, the ETF finished the day 1.5% from a 52-week high which is as close as it has been since late 2020.

2000 was a long time ago, and the current spread of 1,027 trading days without closing at a 52-week high is by far the longest drought since the ETF first started trading in the early 2000s.  For fixed-income investors, the 52-week high list has been a foreign concept, but if concerns over the economy start to increase, they may start spending a lot more time together.

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Bespoke’s Morning Lineup – 9/4/24 – It’s September

Sep 4, 2024

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”Obsolescence is the very hallmark of progress.” – Henry Ford II

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

What started as a weak start to September in the US spread to Asia overnight, followed through to Europe this morning, and is now back in the US this morning. That’s September for you!  The big reports overnight and this morning were PMI readings for the services sector, and they mostly came in weaker than expected but still showed growth. Today’s major economic reports in the US are JOLTS for July and Factory Orders at 10 AM.

Yesterday’s 2.12% decline for the S&P 500 was the worst opening day for a month since May 2020, and the worst start to September since 2015. September is no stranger to big down days to start the month. Since 1953, the first full year of the five-day trading week in its current form, the S&P 500 has declined 1%+ on the first trading day of the month 14 times now, which works out to just under 20% of the time. The next closest months are October and January with eleven each.

In the table below, we summarize the performance of the S&P 500 following 1%+ declines to start the month grouped by month. Over the following day, week, and month, the S&P 500 tends to see steady gains overall, although returns when the decline occurs in September have been below average.  One day and one week later, the S&P 500 was positive but up by just an average of 0.13% and 0.14%, respectively. Four weeks later, though, 1%+ declines to start the month of September have been followed by an average decline of 1.36% which is the worst four-week performance of any month except June.

The chart below shows the four-week performance following 1%+ declines by month.  Here you can really see the weakness that follows these types of declines during the summer months, but outside of the June to September period, 1%+ declines to start the month have been followed by an average four-week performance of 1% or more.

While the four-week performance of the S&P 500 following a 1%+ decline to start September has been weak, performance following recent 1%+ declines have been positive.  The chart below shows the performance of the S&P 500 in the four weeks following the last 20 1%+ declines to start the month, and after each of the last eight occurrences, the S&P 500 has been up four-weeks later every time for a median gain of 4.6%.

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Bespoke’s Morning Lineup – 9/3/24 – Right on Cue

Sep 3, 2024

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“Practice isn’t the thing you do once you’re good. It’s the thing you do that makes you good.” – Malcolm Gladwell

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Right on cue, the first trading day of September has been accompanied by weakness in the futures. One caveat worth pointing out is that much of the weakness is only erasing the late-day surge in the final minutes of trading last Friday.  Overnight in Asia, most major benchmarks were also lower, but the magnitude of the losses was mostly modest.  Similarly in Europe, the STOXX 600 is down less than 0.5%.

Looking ahead to the rest of the trading day, we’ll get a first look at manufacturing activity and sentiment for August with Manufacturing PMIs from S&P at 9:45 and ISM at 10. Also at 10, we’ll get the latest update on Construction Manufacturing, but that’s a July number.

The negative level of equity futures to kick off September should surprise no one as stocks have gotten a lot of practice being weak in September.  Just over the last 20 years, the S&P 500’s median performance the day after Labor Day has been a decline of 0.14% with gains just 40% of the time. More recently, the first real workday of September has been even weaker with declines in seven straight years for a median loss of 0.42%.

With a weak start, Labor Day week has also tended to be weak. Over the last 20 years, the median decline has been 0.20% with gains just half of the time. Over the last four years, Labor Day week has seen declines of at least 1.3% three times. The one exception was in 2022 when the S&P 500 rallied 3.65%.

During the rest of September after Labor Day, performance has been extremely bifurcated. While the S&P 500 has been positive slightly more often than it has been negative, and the median return has been slightly positive (0.26%), the last four years have been weak. As shown in the chart below, performance from the Friday before Labor Day through month end has been negative by at least 1.87% in of the last four years.

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