Nov 14, 2024
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“I know not all that may be coming, but be it what it will, I’ll go to it laughing.” – Herman Melville, Moby Dick
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Shares of Disney (DIS) spiked up about 9% in the pre-market after the release of better-than-expected earnings and a management outlook forecasting double-digit EPS growth over the next two years. The strength in DIS has helped to push futures to their morning highs, although the magnitude of the gains is modest. After yesterday’s inline CPI report, the headline PPI for October was right in line with expectations, although Core PPI was a tenth higher than expected. Initial jobless claims were 3K lower than expected, but continuing claims were in line with estimates.
Crude oil prices are modestly higher, but WTI remains below $70 per barrel. Meanwhile, gold is down another 1%, taking the total decline from its recent peak to more than 8%. Along with gold’s decline, silver is 2% lower, while copper is also down 1% for the fifth day in a row. Physical gold has been weak lately, but the rally in ‘digital gold‘ continues this morning as Bitcoin sits above $91,000 after briefly touching $93,000 in the last 24 hours.
The positive tone in the US counters a weak overnight session in Asia. After Japan’s Nikkei 225 had a modest gain to kick off the week on Monday, it’s been down three days in a row now after last night’s decline of 0.6%. Chinese stocks were even weaker during the session as the Shanghai Composite fell over 1.7% and Hong Kong’s Hang Seng fell 2.0%. Australian stocks bucked the negative trend even as October employment growth rose less than expected. European stocks have had a much more positive tone this morning as the STOXX 600 is up nearly 1% with German stocks leading the charge (+1.4%) despite an inline Q3 GDP report.
With stocks surging to record highs post-election, it should come as no surprise that investor sentiment has turned more optimistic, and that’s exactly what we saw in the latest numbers from the American Association of Individual Investors (AAII) sentiment survey. Over the last week, bullish sentiment spiked to 49.8% from 41.5%. While that’s a sizable jump, bullish sentiment remains below 50% and is lower than it was in September. Meanwhile, along with the rise in bullish sentiment, bearish sentiment also ticked slightly higher rising from 27.6% up to 28.3%.
What was most notable about this week’s numbers was the sharp drop in neutral sentiment which fell from 30.9% down to 21.8%. That’s the lowest level since the bear market lows in October 2022. With the election behind us, investors suddenly became a lot more decisive, and they shifted to the bullish camp.
Nov 13, 2024
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“The punishment of every disordered mind is its own disorder.” – St Augustine
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Asian stocks closed with notable declines for the second day in a row, as Japan, India, and South Korea all fell at least 1%. However, China bucked the trend, with the Shanghai Composite rallying 0.5%. The region’s key data point was the October PPI in Japan, which rose 0.2% m/m and took the y/y reading up to 3.4%. Both readings were higher than expected.
In Europe, this morning’s trading remains much more subdued relative to Asia and the STOXX 600 is down a relatively modest 0.4%. News in the region has been on the quiet side as French Unemployment was right in line with expectations. In Germany, the country’s ECB governing council member Joachim Nagel warned that potential tariffs under the incoming Trump Administration could cut overall growth by 1%, warning that “If the new tariffs actually materialize, we could even slip into negative territory”.
With global markets trading lower, US futures have also seen a downside bias, and US Treasuries have caught a modest bid as the iShares 20+ Year Treasury Bond ETF (TLT) trades modestly higher in the pre-market (0.36%). That does little, however, to put a dent into the 10.2% decline that the ETF has seen since mid-September shortly after the Harris-Trump Presidential debate when the President-elect’s odds in the betting markets bottomed out.
For this morning’s gain in TLT to have legs, this morning’s CPI report will need to cooperate, and we have seen less of that in recent months. While overall trends in inflation continue to move in the right direction, in recent months we have started to see an uptick in the number of higher-than-expected CPI reports.
Starting with headline CPI, after bottoming out at 1 late last year, the 12-month rolling total of higher-than-expected monthly readings has ratcheted up to 5. While that is well off the record-high readings of nine that we saw in 2022 and below the long-term average of 5.4, it’s still higher than it was.
Looking at core CPI, we’ve seen the same trend. After surging to a record high of 8 in October 2020, the 12-month rolling total of higher-than-expected core CPI prints dropped down as low as 2 earlier this year but has since rebounded back up to 5, and that’s higher than the long-term average of 4.8. In both cases, these rolling 12-month totals are nothing out of the ordinary, but if you want bonds to rally, you’re going to need the pace of higher-than-expected inflation prints to slow down.
Nov 12, 2024
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“No one ever accomplishes your dreams for you” – Nadia Comaneci
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
To view yesterday’s CNBC segment, click on the image below.
Is this the hangover from the post-election rager? There’s a downside bias to equities around the world this morning, including the US which has been surging to kick off November. In Asia overnight, equities were lower across the board with the Nikkei down 0.5% while China and India were down over 1%. In Europe, it’s the same story as the STOXX 600 is down 1% after Economic Sentiment from ZEW fell slightly more than expected while German CPI ticked up 0.4% on a m/m basis which was right in line with forecasts. The only economic indicator on the calendar this morning was NFIB Small Business Sentiment for October which came in higher than expected. Given the political leanings of this report, you can expect a much larger increase next month.
With futures pointing to a modestly lower open this morning, it would be the first day this month that the S&P 500 tracking ETF (SPY) gapped lower at the open with the last five trading days being especially strong. The snapshot from our Trend Analyzer below shows the performance of major international ETFs and where they stand relative to their short-term trading ranges. While US stocks have surged, foreign ETFs have performed much less impressively. Just over the last five trading days, SPY has rallied over 5%, while the next closest performer of the group shown has been the FTSE Pacific ETF (VPL) which is only up a bit more than 1%. SPY’s rally also makes it the only one of the six ETFs trading above its 50-day moving average (DMA). Additionally, while SPY closed more than two standard deviations above its 50-DMA yesterday putting at ‘extreme’ overbought levels, three of the five other ETFs shown closed in oversold territory yesterday, including the FTSE Europe ETF (VGK) which settled in ‘extreme’ oversold territory (2+ standard deviations below its 50-DMA).
Below we show one-year price charts of each of the six international regional ETFs summarized above. While most of the charts look similar, SPY stands out from the rest.
Nov 11, 2024
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“It doesn’t take a hero to order men into battle. It takes a hero to be one of those men who goes into battle.” ‒ H. Norman Schwarzkopf
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Fixed income markets are closed this morning in observance of Veterans Day, but the equity markets are open for a full session, and futures suggest a continuation of the post-election rally as crude oil and gold continue to pull back and Bitcoin surges above $80,000. Given the holiday, there’s no economic data on the calendar and little in the way of earnings news, but that will change in the days ahead with CPI on Wednesday and PPI on Thursday. These reports will take on added significance given the upward move in rates lately and comments from Federal Reserve officials that the pace of rate cuts may slow in the months ahead. For now, though, Newton’s first law of motion still applies.
Overnight in China, inflation for the world’s second-largest economy showed more downward pressure as CPI declined 0.3% m/m in October taking the year/year rate down to 0.3% while PPI fell 2.9% relative to last year. Between this data and China’s underwhelming stimulus measures announced after the local market close on Friday, stocks in the country had a mixed start to the week with the Shanghai Composite trading up 0.5% while Hong Kong’s Hang Seng fell 1.5%.
The tone has taken a more decidedly bullish tone in Europe, where the STOXX 600 spiked more than 1% higher to start the week, even with no specific catalyst driving the gains.
The election has come and gone, and with it, the S&P 500 surged 4.7% last week in the third-best Presidential election week performance for the index since 1928. The only two weeks with better returns were the 11.6% gain in 1932 as FDR was elected and the 7.3% gain in 2020 after President Biden was elected. We’d also note that the 3.8% gain following Trump’s 2016 election ranks the fourth best tied with former President Clinton’s re-election in 1996.
Nov 8, 2024
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“Commonplaces never become tiresome. It is we who become tired when we cease to be curious and appreciative.” Norman Rockwell
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US equities paused for a water break this morning as futures trade with a modestly negative bias and yields decline. For all the talk about how a Trump victory would cause a leg higher rin interest rates, the 10-year yield has basically gone nowhere since Monday’s close. International markets are mostly lower as China declined 1% following disappointing news regarding the hoped-for stimulus measures. Crude oil is also following equities lower, but Bitcoin is modestly higher trading right near all-time highs. The only economic report on the calendar this morning is Michigan Sentiment at 10 AM.
The snapshot below from our Trend Analyzer shows where major US index ETFs closed yesterday relative to their trading ranges. Talk about extreme! All 14 of the ETFs listed closed at ‘extreme’ overbought levels (2+ standard deviations above their 50-DMA) yesterday, and each one was up by a minimum of 4.5% over the last week with small and micro-cap related index ETFs up by nearly twice that. It’s been quite a race as every index ETF looks to sprint to the front of the pack.
These moves are a bull’s best friend and usually a hallmark of a strong market, but momentum like this is unsustainable. Just as you can’t start a marathon with a sprint, the market will run out of gas sooner if it doesn’t properly pace itself. It can’t keep sprinting at an intense pace of multi-percentage points per week without tweaking something. It’s natural to have at least a pause, so set your expectations accordingly, and don’t get greedy.
While things look extremely uniform at the index level, sector performance has shown much more dispersion. As shown in the snapshot below, three sectors posted declines over the last five trading days. While six sectors closed yesterday at overbought levels, three finished the day in oversold territory (Consumer Staples, Real Estate, and Health Care), so the gains have been much less uniform beneath the surface.
Nov 7, 2024
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.
“Several commentators have reflected on the fact that this may be one of the great political victories of all time.” – Richard Nixon, 11/7/72
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
As if the Election Day and post-Election Day returns weren’t enough, equity futures are positive again this morning. Today’s early gains are only modest, though, and we just got a bunch of economic reports to go through including Non-Farm Productivity (weaker than expected), Unit Labor Costs (higher than expected), and jobless claims (roughly in line) at 8:30, so the positive tone could change between now and the open. And did we mention that there’s a Fed meeting with a decision on interest rates expected at 2 PM? Markets are overwhelmingly pricing in a 25-bps cut, but what Powell says at the 2:30 press conference will be more important than the actual decision.
Regarding post-election market returns, yesterday’s 2.5% gain in the S&P 500 was historic. Since WWII, market performance the day after Presidential elections was typically negative with a median decline of 0.4% and positive returns just 42% of the time. Yesterday’s gain was the best, surpassing the prior record of 2.2% from 2020.
Small caps had an even better day. While the Russell 2000 has only existed since the late 1970s, yesterday’s 5.8% gain ranks easily as the best, nearly doubling the 3.1% gain after Trump’s last election!
One not-so-bright spot about yesterday’s rally was breadth. Normally, when the S&P 500 rallies 2% or more net breadth for the S&P 500 is also very positive at an average of +3.83. Yesterday’s net breadth reading for the S&P 500 was just +180. Since 1990, there have been 273 days that the S&P 500 rallied at least 2%; of those, only eight had a weaker daily breadth reading. And now for the trivia stat of the day. The last time the S&P 500 rallied 2%+ and net breadth was below +200 was on 11/4/20, the day after the 2020 election when breadth was negative 32!
