Nov 15, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Anyone with any degree of mental toughness ought to be able to exist without the things they like most for a few months at least.” – Georgia O’Keefe
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
After yesterday’s monster rally, futures are still in a celebratory mood as futures are higher across the board. Even bitcoin, which sat out Tuesday’s rally is trading up over 1.5%. A slug of economic data was just released, including PPI, Retail Sales, and Empire Manufacturing. In a nutshell, the inflation data was weaker than expected while Retail Sales and Empire Manufacturing were better than expected. Equity futures are little changed in response to the data while treasury yields are modestly higher which is likely due to the stronger Retail Sales report. That being said, as discussed yesterday, with the door closed on further rate hikes, good economic news is actually good market news!
Bulls went a ‘few months’ where equities did nothing but seemingly go down, and by the end of October, you couldn’t have faulted anyone for becoming frustrated with the way things were going in the market. For those who had the toughness to stick it out, they’ve been rewarded in the last two to three weeks as the S&P 500 has rallied over 9% from its lows.
Investors in small-cap stocks have had an even tougher time of it lately, but they had their day yesterday as the Russell 2000 surged 5.44% which was 3.53 percentage points more than the S&P 500’s gain of 1.91%. Since the Russell 2000’s inception in 1979, yesterday was only the 24th day that the index outperformed the S&P 500 by 2.5 percentage points or more in a single day, and in the chart below we have highlighted each of those days with a blue dot.
As shown, there were several of these occurrences coming out of the COVID lows as investors were flush with cash from all the stimulus sloshing around in the US economy, and before that most, but not all of the other occurrences were clustered around the period coming out of the Financial Crisis, around the peak of the dot-com boom, and after the 1987 crash.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Nov 14, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“It is better to fail in originality than to succeed in imitation.” – Herman Melville
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
After a slow start to the week for economic data things are picking up this morning. We’ve already had the release of NFIB’s Index of Small Business Optimism, but that’s just the appetizer for the October CPI report which is coming out as we send this. Heading into the report, there was very little movement in markets as futures, interest rates, and commodities have seen little in the way of change from their closing prices on Monday.
When it comes to monthly inflation reports, things really have changed over the last year. In October of last year, the market was trying to navigate a record pace of higher-than-expected CPI reports as the ‘transitory’ inflation of the Covid era decided to stick around longer than anyone had expected. At the headline level, the trailing 12-month total of higher-than-expected headline CPI reports was at a record high of nine (top chart) while the trailing 12-month total of higher-than-expected Core CPI prints was also at a record high of eight (lower chart).
Fast forward 13 months and the ‘uncontrollable’ wave of inflation has crested. At the headline level, there has been just one higher-than-expected CPI report in the last 12 months, and that occurred last month. The last time this reading was that low was back in October 2019. At the core level, there have been just two higher-than-expected CPI prints, and that’s the lowest since August 2019.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Nov 13, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Victory is not simply defeating the enemy, but also preserving and protecting the values we hold dear.” – George B McClellan
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Unlike seemingly most Fridays this year where investors were hesitant into the weekend, last week bucked the trend as the S&P 500 rallied more than 1.5%. The downside of the positive close to the week is that there’s less fuel for a relief rally to start the week, and that’s exactly what we’re seeing this morning as futures trade modestly lower. It’s a quiet start to the week in terms of economic data, but there will be a ton of events to watch this week as the economic calendar is packed, including a very important CPI report on Tuesday. Earnings season will also unofficially wind down as Walmart reports later this week, and on the geo-political stage, President Biden will meet with Chinese President Xi in San Francisco on Wednesday.
While there isn’t much in the way of actual economic data today, one important report will be the NY Fed’s Survey of Consumer Expectations, specifically its reading on inflation expectations. In last Friday’s Michigan Sentiment report, inflation expectations showed a meaningful increase. While that could just be a one-off quirk of that survey, any confirmation of that trend in today’s report would spark concerns in the Treasury market. The results of that survey will be released at 11 AM.
With the S&P 500 and Nasdaq up over 1% last week, it looked like a good week for stocks, but that’s not a complete picture. Smaller stocks were crushed with the Russell 2000 down over 3% and micro-caps down closer to 4%. At the sector level, performance was also mixed. While the Technology sector rallied 4.5% and Communication Services gained over 1%, sectors like Energy, Utilities, and Real Estate all fell over 2%. In terms of where various sectors finished the week relative to their trading ranges, there was also a lot of disparity with Technology at ‘Extreme’ overbought levels, while Energy and Health Care finished the week at Oversold levels.
In a nutshell, last week was a week where what had been working all year continued to work, and what hadn’t been working didn’t. The scatter chart below compares sector performance on a YTD basis (horizontal axis) with performance over the last five days. As shown, there is a clear trend where sectors that were positive on a YTD basis finished the week higher and vice versa. Of the eleven sectors, the only two where last week’s performance wasn’t in the same direction as their YTD performance were Consumer Staples and Materials.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Nov 10, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“We have so much to say, and we shall never say it.” ― Erich Maria Remarque, All Quiet on the Western Front
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Investors are doing their best to reverse yesterday’s weak tone and end the week on a positive note. Last Friday, we were finally able to buck the trend of declines heading into the weekend, and if the market could do it again today, that would be a positive sign. The only economic report on the calendar is Michigan Consumer Sentiment at 10 AM, and the inflation expectations components of that report will be the primary focus of the day- at least when it comes to scheduled data.
Unlike every other day this week where the S&P 500 traded higher on the day and the equal-weighted version traded lower, on Thursday, they both traded lower with declines of about 0.8%. In just the first four days of this week, the equal-weighted index underperformed the cap-weighted index by 1.5 percentage points, and over the last 200 trading days, the performance gap between the two indices now stands at over 15 percentage points. A gap that wide is practically unheard of, and since 1990, it has been wider on 55 trading days, and they all occurred in the periods spanning December 1998 through April 1999 and then briefly between March and April 2000.
The record performance gap between the market cap and equal weight versions of the S&P 500 topped out briefly above 20 percentage points for a day in March 2000, but there were multiple occurrences in the early 2000s and coming out of the Financial Crisis when the performance gap was over 20 percentage points in favor of the equal weight index. When you think about it, it makes sense as it would be easier for the smallest stocks in an index to see big moves (especially after a large market decline) than it would for the largest companies in the world.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Nov 9, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“If you’re lonely when you’re alone, you’re in bad company.” – Jean-Paul Sartre
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Futures are basically flat this morning as the Nasdaq and S&P 500 each look to extend their winning streaks to ten and nine, respectively. The only data on the calendar today is jobless claims at 8:30, but there is a decent amount of Fedpseak to navigate including Chair Powell at 2 PM. With the market going up every day now for nearly two weeks, you can imagine that investor sentiment has improved. In this morning’s latest update to the AAII sentiment survey, bullish sentiment surged from 24.3% up to 42.6% which is the highest level since August. Bearish sentiment, conversely, has been nearly cut in half falling from just over 50% (50.3%) down to 27.2%.
As treasury yields have collapsed over the two weeks, short-term returns on long-term US Treasuries have surged. Take the iShares 20+ Year US Treasury ETF (TLT). Over the last two weeks, it has surged over 7% putting its two-week change in the 99th percentile relative to all other ten-day moves in the ETF’s history. It’s still down over 7% since the end of August, but that’s a story for another day.
Given the magnitude of the recent move and the big losses we have seen in TLT in recent months, it shouldn’t come as a surprise that the ETF’s day-to-day volatility has also become elevated. Over the last 50 trading days, TLT’s average daily move has been 1.10% (up or down) which ranks in the 94th percentile relative to all other periods. The only times where this measure was higher were during the Financial Crisis, when S&P downgraded the sovereign debt rating of the US from AAA, briefly during COVID, and most recently, late last year and into early this year.
While volatility in the Treasury market is historically high, volatility in the equity market remains low. Over the last 50 trading days, the S&P 500 tracking ETF (SPY) has been just 0.65% which ranks right in the middle of its historical range.
With TLT averaging a daily move of over 1.1% it has been about 45 bps more volatile than SPY over the last 50 trading days. Since the inception of TLT in late 2002, there were just 17 trading days spanning late 2010 and into early 2011 and just another 5 trading days in July 2015 where the spread was wider. In other words, you don’t see this very often.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Nov 8, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Libraries should be open to all—except the censor.” – 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.
Futures are little changed this morning but biased to the positive side, as the direction of the market is listless with little in the way of economic data or major earnings reports to speak of. Perhaps the most notable move has been in crude oil, where WTI is down over 1% after falling through its 200-day moving average yesterday.
Yesterday’s gain for the Nasdaq was the index’s eighth straight positive day in a row and the longest streak of consecutive gains since November 2021. In the process of this 8.3% rally, the Nasdaq has also managed to reclaim both its 50 and 200-day moving averages (DMA)- levels it was below before the streak started. While the Nasdaq has managed to trade back above both of its key moving averages, it finished the day right at the downtrend that has been in place since the summer highs, so that is a potential roadblock as the rally looks to keep going.
Eight-day winning streaks are nothing out of the ordinary for the Nasdaq. Since the index’s inception back in 1971, there have been 86 prior winning streaks of at least eight days with the longest, back in 1979, stretching to 19 days. In the current streak, we’re not even halfway there. What is much more uncommon for the Nasdaq is to start an eight-day winning streak below both its 50 and 200-DMAs and by the eighth day of the streak to trade back above both of those levels. Since 1971, there have only been ten prior periods where that occurred (red lines in the chart).
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
