Nov 24, 2023
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“If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.” – Warren Buffett
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
As you might expect, it’s a snoozer in US markets this morning. There are no earnings reports to speak of, and the only economic data on the calendar are preliminary PMI readings for the US Manufacturing and Services sectors. US equity markets will close at 1 PM this afternoon in what is likely to be a very quiet session.
Overnight in Asia, we saw a mixed but mostly lower session. The Nikkei was up 0.5% after a lower-than-expected reading in CPI, but Chinese, India, and South Korean stocks were all lower. For the entire week, though, the tone was more positive. Moving over to Europe, trading is more positive as the UK is the only major benchmark in the red for the day while most other countries are modestly higher. On the rates front, Bank of France Governor Villeroy de Galhau said that barring an unexpected event, there will be no further rate hikes while BoE economist Huw Pill commented that even with economic data weakening, high inflation is keeping the central bank from cutting rates.
For this Thanksgiving weekend, more Americans than ever were expected to fly providing more evidence that the world is finally back to normal (or as normal as it will ever be) after three years of various Covid restrictions and precautions. While air traffic has more than fully rebounded, though, the same can’t be said for airline stocks. As shown in the chart below, while the US Airlines ETF (JETS) initially plunged 65% from its 2019 highs in the early days of COVID, three and a half years later, it’s still down 48% and in what has been a long and turbulent downtrend.
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Nov 22, 2023
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“In a crisis, be aware of the danger–but recognize the opportunity.” – John F Kennedy
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Heading into the last trading day before Thanksgiving (and the last day of the week for many others), equity futures are higher this morning, treasury yields are lower, and crude oil is down sharply following news that Saudi Arabia may cancel this weekend’s meeting citing disappointment with members not aboding by production quotas. There’s also a decent amount of economic data to squeeze into the day with Thursday’s holiday, and those reports include jobless claims, durable goods, and Michigan Sentiment as well as crude oil and natural gas inventories. On the earnings front, shares of NVIDIA (NVDA) are basically flat on the morning even after reporting blowout earnings last night while Deere (DE) is down 6% after dramatically lowering guidance as high-interest rates crimp the financing environment for heavy equipment.
Thanksgiving week has historically been a positive one for stocks, and that has also been true for the day before and the day after Thanksgiving. Since 1945, the S&P 500’s average daily change has been 0.03% while the median gain has been 0.05%. The scatter chart below compares the S&P 500’s performance on the day before Thanksgiving to its YTD performance heading into the week. For all years since 1945, the S&P 500’s median change on the day before Thanksgiving has been a gain of 0.27% with positive returns 74% of the time. When looking at the S&P 500’s YTD performance heading into Thanksgiving week, there has been little impact on how the market performs around Thanksgiving. As shown in the chart, while the median gain on Wednesday has been 0.27%, performance in those years when the S&P 500 was up 18% or more YTD was right around the same at 0.25% with gains 78% of the time.
Like the day before Thanksgiving, performance the day after has also been positive. For all years since 1945, the S&P 500’s average performance the day after Thanksgiving has been a gain of 0.24% with positive returns two-thirds of the time. In those years when the S&P 500 was up 18% or more YTD, the median change has been a gain of 0.20% with positive returns just 58% of the time. That also includes the two worst Fridays after Thanksgiving when the S&P 500 fell 2.27% in 2021 (remember the Omicron scare?) and 1.72% in 2009 (concerns of a debt default in Dubai).
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Nov 21, 2023
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“Common sense is not so common.” – Voltaire
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Outside of a number of retail-related earnings reports with some mixed results, it’s been a quiet morning so far with little in the way of earnings results. The only major report on the calendar today is Existing Home Sales at 10 AM, and that will be followed by the minutes from the latest FOMC meeting at 2 PM. Perhaps the most notable event for today (and the rest of the week for that matter) is NVIDIA’s (NVDA) earnings report after the close.
If you’re one of the millions of Americans traveling by car this weekend, filling up the car has become a lot less painful than it was in the summer. Since Labor Day, the national average price of a gallon of gas has cratered for a total decline of just over 15% through yesterday, and that includes 54 straight days of declines since 9/28. After being up by more than 20% on a YTD basis back in mid-September, average gas prices throughout the country are now up less than 3%. Now, that’s something to be thankful for!
While prices are down sharply since Labor Day, the 13.5% decline isn’t unprecedented. As shown in the chart below, it’s typical for prices to fall at this time of year. Since 2004, the national average price has only risen between Labor Day and Thanksgiving six times, and the average change has been a decline of 8.3%. This year’s decline though is the largest since 2015 and ranks as the sixth-largest decline during this period of the last 20 years.
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Nov 20, 2023
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“We can know only that we know nothing. And that is the highest degree of human wisdom.” – Leo Tolstoy
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
It’s been just over three weeks now that US equities have been in rally mode as we head into a holiday-shortened trading week. Markets are closed on Thursday for Thanksgiving, and Friday is a shortened session with stocks closing for the week at 1 PM on a day. With just three and a half days of trading, the economic calendar is very light, although the earnings calendar will be relatively busy on Tuesday with several retailers, as well as NVIDIA (NVDA), reporting results. Even Fed officials, who seem to love getting in front of a microphone nowadays, are mostly taking the week off.
Over the course of the three-week rally for US stocks, the S&P 500 has been positive all three weeks, and its total gain during that span has been just under 10%. Rallies of this magnitude in a three-week span aren’t unprecedented, but they aren’t common. Prior to the current surge in stocks, the last time the S&P 500 rallied more over a three-week span was back in June 2020.
While the S&P 500’s rally has been impressive, the Nasdaq has rallied even more with its gain of 11.7%. Like the S&P 500, the last time the Nasdaq rallied by a larger amount in a three-week span was back in April 2020, although there were two times in 2022 (April and August) when it rallied by more than 10% over a three-week period.
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Nov 17, 2023
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“There’s no such thing as simple. Simple is hard.” – Martin Scorsese
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
After tons of economic data, at least twenty different Federal Reserve speeches, and the finale of earnings seasons, stocks finished the week with healthy gains. Easy a pie, right? Well, if you asked anyone at the beginning of the week how the week was going to go, we’d put good money that no one would have expected the Russell 2000 to rally over 5%…in a single day! Everything is easy in retrospect.
This morning, futures are modestly higher on the day, and the only economic data on the calendar is Building Permits and Housing Starts at 8:30. There are several Fed speakers scheduled to speak between now and noon, and the earnings calendar is very light.
Stocks in Asia were mixed overnight. Hong Kong stocks declined over 2% after Alibaba (BABA) fell over 10% on news that the company was canceling the IPO of its cloud business. Foreign Direct Investment in China also declined 9.4% on a YTD versus a decline of 8.4% in September. Over in Europe, though, it’s a much more positive tone as major benchmark indices are up across the board. CPI in the Eurozone decelerated for the seventh straight month falling from 0.3% down to 0.1% which was in line with expectations while UK Retail Sales unexpectedly fell 0.3% versus forecasts for an increase of 0.3%. That weaker report has bonds rallying on hopes that the UK’s rate hiking cycle is over.
There are still almost two weeks left in the month, but along with the equity rally, Treasuries have also surged. Based on where the iShares 20+ Year Treasury ETF (TLT) is trading this morning, its month-to-date gain currently stands at 7.8% which, if it holds through the end of the month, would be the largest monthly gain since August 2019.
The chart below shows the monthly prices of TLT since the start of 2003, and gains of 5%+ have been nothing out of the ordinary with 23 occurrences, or about one every ten months. Since TLT’s monthly peak in July 2020, this month’s gain would be just the third occurrence (if it holds). The last two occurrences came in a three-month span in which TLT rallied over 11% before rolling over again.
The chart below shows the monthly change of TLT going back to 2003, and what stands out about the current period is the fact that this month’s gain follows a loss of similar magnitude in October. That would make it just the second time in TLT’s history that it fell 5%+ in one month and then rallied 5%+ the next. Ironically, the only other occurrence was in October and November of last year. With more and more indicators lately, it seems as though the last time we saw similar extremes was exactly a year ago.
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Nov 16, 2023
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“Asking economists for investment advice is like asking a physicist to fix a broken toilet. Not their field, though sort of related.” – Milton Friedman
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
As if the calendar of economic data hasn’t been significant enough already, it’s another busy day for data today with Import and Export Prices (both weaker than expected), Jobless Claims (higher than expected), and the Philly Fed (less negative than expected) at 8:30. Then at 9:15, we’ll get releases of Industrial Production and Capacity Utilization, followed by Homebuilder Sentiment at 10 and the KC Fed Manufacturing report at 11.
In addition to the economic slate, earnings season comes to an unofficial end today as Walmart (WMT) reported earlier this morning. While the company reported better-than-expected earnings and sales, the stock is trading down over 6% after lowering full-year guidance and some cautious commentary from management on the state of the consumer (see page four of today’s report).
Since last Thursday’s close when the last update to the weekly sentiment survey from the American Association of Individual Investors (AAII) was released, the S&P 500 has rallied over 3%. Given the surge in stocks, you would expect to see a sharp spike in bullish sentiment, but as this week’s latest update shows that hasn’t necessarily been the case.
In the last week, AAII’s survey of bullish sentiment showed an increase from 42.6% up to 43.8%. Granted, the prior week saw an increase of over 18 percentage points, but with the market continuing its run, we would have expected a bullish reading of closer to 50% this week.
Not only was the increase in bullish sentiment modest, but bearish sentiment increased slightly rising from 27.2% to 28.1%. Again, the prior week showed a sharp decline in bearish sentiment, but with the S&P 500 up so much during the week, any increase in bearish sentiment is a bit surprising.
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