Feb 24, 2025
Lost amid all the selling in equities last week was the fact that crude oil and gold both closed out the week with significant streaks of losses and gains. For crude oil, last week’s decline of 0.5% was only modest, but it extended the current streak of declines to five weeks in a row. As shown in the chart below, this is the longest streak of weekly declines for black gold since December 2023 and just the 26th losing streak of five or more weeks since 1985.
Ironically, even though crude oil is down five weeks in a row, the total decline has been less than 10%. The ETF that tracks crude oil – USO – was near a 52-week high earlier this year, but even after the recent declines, it closed out last week right in the middle of its trading range and sandwiched between the 50 and 200-day moving average. Coupled with some of the weak economic data, though, the weakness in crude is adding to concerns that the economy is slowing down.
Unlike crude oil, which has been moving lower, gold has surged. Last week capped off the eighth straight week of gains, which is the longest winning streak since July 2020. Additionally, since 1985, there have only been five other streaks that lasted eight or more weeks and only three lasted longer.
A look at recent trading in the Gold ETF – GLD – shows that a ninth week of gains may be harder to achieve. As the price of gold has surged, the rally has taken its price to the top end of its trend channel that has been in place since last spring. That doesn’t mean it can’t keep rising, but it just illustrates how extended gold has gotten on a short-term basis.
Feb 24, 2025
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“I never look at where a candidate has gone to school. Never!” – Warren Buffett
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s been a tough couple of days for bulls as the S&P 500 pulled back over 2% Thursday and Friday after hitting record highs the day before. Bulls will look to make a stand this morning, but the real tell will be to see how much staying power they have. It’s a quiet day for earnings, but Wednesday will bring about a very important report from Nvidia (NVDA). The economic calendar is also quiet today with the Dallas Fed Manufacturing Business Survey, the only report on the calendar.
The college admissions process has never been more competitive (and it’s harder than ever for the richest Americans to bribe their kids into the top colleges). Still, the quote above from Warren Buffett in this year’s Berkshire Hathaway annual letter should provide comfort to any high school seniors (or their parents) who didn’t get into their first choice. That line is only one of many parts of what has become required reading over the last few decades. Another good one: “Businesses, as well as individuals with desired talents, however, will usually find a way to cope with monetary instability”.
Berkshire’s annual letter also serves as a reminder of what a money-making machine the company has been over the last 60 years. The first chart below shows the annual percentage change in market value of Berkshire Hathaway versus the S&P 500 from 1965 to 2024. As the company has become larger over the years, its margin of outperformance versus the S&P 500 has narrowed as the company has become so large that it’s harder to move the needle on a relative basis. Back in the 1970s and 1980s, though, the size of some of the blue bars dwarfs the red ones.
In Buffett’s first 11 years at the helm of Berkshire, the company ‘only’ outperformed the S&P 500 in six years, but from 1976 to 1983, the company outperformed for an epic eight straight years taking its cumulative percentage of years of outperformance above 70%. Since then, the pace of outperformance has leveled off with time, and through 2024, Buffett has outperformed the S&P 500 in two-thirds of all years.
Outperforming in two-thirds of all years may not sound all that impressive at face value, but like a snowball, it adds up. The chart below shows the cumulative total return of the S&P 500 and Berkshire since 1965. The S&P 500’s cumulative gain during this period is over 39,000%, but it’s barely noticeable compared to Berkshire’s gain of more than 5,000,000%!
Given its size, it has become more difficult for Berkshire to significantly outperform the S&P 500, especially during bull markets. However, given the company’s track record under Buffett’s leadership, most investors are willing to give him the benefit of the doubt. With that in mind, the stock’s modest underperformance versus the S&P 500 over the last year hasn’t caused concern for investors. The last two sessions also serve as a reminder that when the times get tough, Berkshire usually hangs in as it only declined 1% relative to the 2%+ decline for the S&P 500.
Feb 21, 2025
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Feb 21, 2025
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“You will become way less concerned with what other people think of you when you realize how seldom they do.” – David Foster Wallace
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
If you’re looking at futures on the Dow, it’s not looking like a positive start to the last trading day of the week. Futures on that index are down nearly half of a percent on news that the index’s second most heavily weighted component – UnitedHealth Group (UNH) – is down over 10% following a WSJ report that the Department of Justice has launched an investigation into the company for its billing practices related to its Medicare Advantage plans. Outside of the Dow, though, S&P 500 futures are flat, and the Nasdaq is on pace to open 0.35% higher.
Overnight, Asian markets traded higher to close the week with broad-based gains as Japanese CPI rose 0.5% m/m versus an increase of 0.6% in December. In Europe, stocks have also bounced back from yesterday’s decline with the STOXX 600 trading up over 0.5% putting it back into the black for the week. The gains come despite some mixed PMI readings where the Manufacturing index came in higher than expected (but still in contraction territory). At the same time, the Services PMI, which was above 50, missed expectations.
The S&P 500 and Nasdaq were down less than 0.5% yesterday, but there were some big moves in individual stocks as some of the market’s highest flyers in recent weeks/months were taken out to the woodshed. Among the largest US banks and brokers, the percentage declines may not have been as large as some of the other market areas, but relative to their normal price moves, the declines were large. Of the six large US banks shown below, all of them were down at least 1%, with four down over 3%; JPMorgan Chase (JPM) and Morgan Stanley (MS) both fell more than 4%.
The moves may have been painful, but putting them in perspective, most of these stocks have seen large gains in recent months. On a six-month chart, they don’t look especially significant. Besides Bank of America (BAC), they were all either at or right near 52-week highs heading into yesterday’s decline.
Feb 20, 2025
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“High expectations are the key to everything.” – Sam Walton
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Walmart (WMT) marked the unofficial end to earnings season this morning by reporting slightly better than expected earnings on inline revenues. The company also lowered guidance for Q1 and the full year. As a result of the lowered guidance, the stock is getting pummeled in the pre-market and is on pace to gap down close to 9%. For many high-growth stocks, a 9% gap down in reaction to earnings may not sound extreme, but WMT has historically been a much less volatile stock. Since 2001, its average one-day move in reaction to earnings has been 2.9%, so if current levels hold through the end of the trading day, today’s move would be more than triple its historical average move.
The table below shows prior earnings reports since 2001 when WMT gapped down by at least 5%. It’s only happened five other times, and it has never gapped down more than 8%, so that would put today’s downside gap on pace to be the most negative gap opening in reaction to earnings since at least 2001. As Sam Walton’s quote above says, high expectations are the key to everything, and when a stock like WMT heads into an earnings report trading for over 37 times earnings and lowers guidance, reactions like this aren’t surprising.
For the broader market this morning, S&P 500 futures indicate a decline of about 0.3% at the open and trade near their lows of the day. Today’s weakness, however, comes just hours after the S&P 500 closed at an all-time high yesterday – its third record closing high of the year. The market doesn’t look like it’s done much since its high in December, but YTD, the S&P 500 has managed a rally of over 4%. We’ve seen some weak housing-related data this week, but today’s economic focus will shift to jobless claims and the Philly Fed at 8:30 and leading indicators at 10 AM. Also on the calendar, we’ll hear from various Fed officials throughout the day, starting with Chicago Fed President Goolsbee just after the opening bell.
