Jun 11, 2021
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“Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars’ worth of groceries. Today, a five-year-old can do it.” – Henny Youngman
Equities are looking to close out the week on a positive note today as futures have been steadily drifting higher all morning. The economic calendar is light today with Michigan Confidence the only report on the calendar. One aspect of that report that investors will be watching is inflation expectations. Any material increase in those readings could pose a threat to the positive early tone. The latest readings on inflation expectations in this report were 4.6% for the next year and 3.0% over the next 5-10 years.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around the world overnight, and the latest US and international COVID trends including our vaccination trackers, and much more.
The market certainly took yesterday’s high CPI reading in stride. On the one hand, looking back at the last 35+ years, there have been a number of other periods where headline CPI temporarily eclipsed 0.5%. Unique about the current period, however, is that May’s report was the third straight month that prices increased 0.5%+ on a month over month basis. We don’t see that happen too often.
Since 1985, there have been just three other periods where headline CPI jumped 0.5% three months in a row, and in none of those prior periods did the streak extend to a fourth month. In the chart below, we show the 10-year US Treasury yield going back to 1985 and have marked each of the three-month streaks where CPI topped 0.5% in red. In two of the three periods (1990 and 2008), that surge in inflation marked the peak of the 10-year yield for at least the next year. In the third (2005), yields kept rising over the following year increasing from a level of about 4.3% up to 5.3% nine months later.
Jun 10, 2021
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“Inflation hasn’t ruined everything. A dime can still be used as a screwdriver.” – H. Jackson Brown, Jr.
It’s inflation day in the US, as the May CPI is on tap for release or, depending on when you’re reading this, has already been released. The only other major report on the calendar is Jobless Claims at 8:30. Futures are mixed heading into the releases, treasury yields are modestly higher, and bitcoin is up over 4%.
Read today’s Morning Lineup for a recap of all the major market news and events including a recap of the ECB meeting, the latest economic news from around the world overnight, and the latest US and international COVID trends including our vaccination trackers, and much more.
If you were up earlier this morning and in the Northeast US or parts of Eastern Canada, hopefully, you got a chance to view the eclipse. One ‘eclipse’ investors continue to impatiently wait for is the S&P 500 and its prior record high from early May. As we noted on the blog yesterday, the S&P 500 has made multiple attempts since the start of June to top the prior record, but after getting extremely close each time, either the buyers took a break or the sellers came in.
Wednesday marked the fourth straight day that the S&P 500 traded to within 0.15% of its record high but came up short each time. Since intraday data for the S&P 500 begins in the early 1980s, only five other periods have experienced either as long or longer of a stretch of days where the S&P 500 traded within 25 bps of a record high but never got there. The first of these periods occurred in the first half of the 1990s, while the last three all occurred in the year spanning the second half of 2016 and the first half of 2017.
So, does running out of steam just below record highs imply a market running out of gas or recharging ahead of a new leg higher. As shown in the chart below, the results were mixed, but more often than not, investors looked back at these occurrences from higher levels.
Jun 9, 2021
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“The reason that you can win at poker and horse racing is the same – you are not betting against the house; you are betting against the other players.” – Steven Crist
Forty-eight years ago today, spectators in the hot, humid long island sun witnessed one of the greatest performances in the history of horse racing, and in the winner’s circle, there was Secretariat, winner of the coveted Triple Crown for the first time in a quarter-century after completing one of the greatest runs in horse-racing history. The horse ran the fastest Kentucky Derby ever, a record that still stands today, easily won the Preakness (unofficially in record time), so it was only fitting that the win at Belmont came in at a record of 31 lengths and likely barely breaking a sweat.
Like poker and horse racing, when it comes to investing, rather than betting against the house, which always wins, you are betting against the crowd. That means that the more informed you are as an investor, the better your chances of success. Just as a bettor who wagers based on the name of the horse or the color of their silks usually leaves lighter in the wallet than when they arrived, an investor chasing the hottest stocks or most popular trends usually, even during one of the greatest runs in market history usually ends worse off than the person on the other side of the trade.
US equity futures are right around the flatline this morning, and the overnight session was a snoozer as futures have traded in a range of less than 0.25%. Crypto assets have seen a bounce after yesterday’s plunge, and commodities are mixed.
Read today’s Morning Lineup for a recap of all the major market news and events including an update on infrastructure talks, the latest economic data from Asia and Europe, and the latest US and international COVID trends including our vaccination trackers, and much more.
Yesterday, investors who still read a physical newspaper were greeted with some interesting headlines related to inflation. Right below the fold on the front page of the Wall Street Journal, they saw “Commodity Prices Skyrocket, Adding to Inflation Fears”. Then on the front page of the Markets section (B1) right at the top was the headline “Traders Bet on Return of $100 Oil”. With headlines like that and a CPI report coming up on Thursday, weakness in the Treasury market would be a safe assumption. Not so fast. While the yield on the 10-year US Treasury was an already low 1.57% when yesterday’s Journal came off the presses, ever since then, it has done nothing but go down. In fact, as of this morning, the yield dropped below 1.5% and on pace for the lowest closing yield in over three months.
Jun 8, 2021
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“You can only do so many things great, and you should cast aside everything else.” – Tim Cook
Depending on whether you look at closing or intraday levels, the S&P 500 closed out yesterday within six or twelve points of a record high. This morning, equity futures are up relative to Monday’s close, and the way things are going now, that closing high from a month and a day ago will be topped at the open.
The economic calendar is light today. NFIB Small Business Optimism for May was released earlier, and while economists were expecting a modest bounce from April’s level, the actual reading showed a modest decline (99.6 vs 101.0 consensus estimate and 99.8 in April). A key theme from this month’s report was the fact that almost half of all small businesses said they have been unable to fill open positions. As an example, 93% of small business owners hiring or trying to hire reported that they received few or no qualified applications. We’re also likely to see a reinforcement of this trend later this morning when the JOLTS survey shows another likely record number of job openings despite the fact that job creation has been less impressive than forecasts.
Read today’s Morning Lineup for a recap of all the major market news and events including a discussion of the Biogen Alzheimer’s treatment, a recap of activity and economic data overnight, and the latest US and international COVID trends including our vaccination trackers, and much more.
Yesterday marked the beginning of the annual Worldwide Developers Conference (WWDC) from Apple (AAPL). While the company has been holding this event for over 30 years, its popularity really exploded following the launch of the iPhone in 2007. The conference first sold out in 2008 after Steve Jobs announced in October 2007 that Apple would open the iPhone up for developers to write software. The WWDC has historically been a noteworthy event for people involved in the development of Apple products, but it hasn’t historically been a great period for the stock.
The table below shows the performance of AAPL stock leading up to and during every prior WWDC in the iPhone era and since the conference first sold out in 2008. This year marks only the fourth time in the last 14 years where AAPL’s stock was down YTD heading into the conference. During the conference, though, performance has been on the weak side averaging a decline of 1.43% (median: -1.15%) with positive returns only four out of 13 times.
Jun 7, 2021
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“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” – Winston Churchill
Futures started off with a negative bias this morning but have been drifting higher all morning and are now modestly positive for both the S&P 500 and Dow, while the Nasdaq is just barely lower. Treasury yields are higher, but the 10-year yield is still well below 1.6%, and even bitcoin is following the lead of equities and moving further into positive territory. It was a mixed weekend for the crypto-currency as China appears to be cracking down on the space while El Salvador said it will recognize bitcoin as legal tender.
Read today’s Morning Lineup for a recap of all the major market news and events including a discussion of the Global Minimum Tax, a recap of activity in Asia and Europe, and the latest US and international COVID trends including our vaccination trackers, and much more.
With the S&P 500 inching closer to new highs last week, the majority of sectors also traded higher. With crude oil continuing to rally towards 52-week highs, the Energy sector surged nearly 7% taking its YTD gain to nearly 50%. Behind Energy, four other sectors were up over 1%, and there are now four sectors that are already up over 20% YTD. Talk about a strong year!
On the downside, only two sectors were down last week (Consumer Discretionary and Health Care). Consumer Discretionary is the only sector trading more than 1% below its 50-day moving average and one of just two sectors (Utilities being the other) that finished the week below that level.
Jun 4, 2021
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“Public business, my son, must always be done by somebody. It will be done by somebody or other. If wise men decline it, others will not; if honest men refuse it, others will not.” – John Adams
If someone says that “you live in a bar,” the odds are that it’s not a compliment, but if you ever find yourself on the receiving end of that comment, you’re in good company. John Adams may not have been the first President of the United States, but he was the first President known to have taken up residence in a bar. On this day yesterday in 1800, President Adams moved into the Union Tavern in Georgetown while construction was being done on the White House. That means that on this day in 1800, President Adams became the first and only known sitting US President to ever wake up in a bar. There may have been others in the 220 years since, but to our knowledge, the lips of Secret Service agents have been sealed!
In market news this morning, US futures have moved into positive territory following the weaker than expected May Non-Farm Payrolls report, but the big move has been in the crypto space where bitcoin is down over 7% after Elon Musk tweeted a broken-hear emoji for the token. A 7% decline on an asset class worth about $700 billion over a tweet? If last year wasn’t 2020 and this year wasn’t 2021, we’d be surprised at a move like that.
Read today’s Morning Lineup for a recap of all the major market news and events including a recap of the RBI rate decision, economic data out of Europe, and the latest US and international COVID trends including our vaccination trackers, and much more.
Maybe it’s just because the topic is in the front of our minds lately, but it seems as though everywhere we look, the same rangebound pattern shows up. This morning’s example is the Russell 2000. All year now, the index has been in a relatively narrow range, and given the fact that the index closed yesterday right in the middle of that range, it doesn’t look like it’s going to break in one way or the other very soon.
