Aug 28, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“If I had asked the public what they wanted, they would have said a faster horse.“ – Henry Ford
The conventions for both parties are done, and the race is officially on as President Trump and former Vice President Biden will take the next two months to make their case to the American people. What was looking like a runaway for Biden just a few weeks ago has become a bit closer. Biden still has the lead over Trump, but the gap has narrowed by close to two-thirds from its widest levels in July. It’s natural for candidates to see a bounce after their conventions, and this week alone Trump has seen his contract to win the election increase by three percentage points. We’ll know soon enough if that bounce was a sugar rush or something more lasting.
In other news this morning, futures are higher again as the S&P 500 looks to make it seven straight positive days in a row. In order to get there, though, the market will have to get through a busy slate of economic data with Personal Income (better than expected), Personal Spending (better than expected), Wholesale Inventories (better than expected), Chicago PMI, and Michigan Confidence all coming out between now and 10 AM. The dollar is also weaker today and gold is rallying following news that Japanese PM Abe will step down at the end of his term and that has the yen rallying.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
With the market at record highs, there are a number of conflicting signals concerning investor sentiment. While the AAII sentiment survey routinely shows negative sentiment, and the latest Consumer Confidence report showed a lack of enthusiasm for equities, other sentiment surveys like Investors Intelligence or put/call ratios show a more optimistic backdrop. Another indicator of sentiment showing optimism on the part of investors is the National Association of Active Investment Managers (NAAIM) Exposure Index Index.
The NAAIM Exposure Index tracks the exposure of its members to US equity markets. Each week members are asked to provide a number that represents their exposure to markets. A reading of -200 means they are leveraged short, -100 indicates fully short, 0 is neutral, 100% is fully invested, and 200% indicates leveraged long. This week’s reading of 106.56 indicates one of the highest readings in the history of the index.
Aug 27, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” – Warren Buffett
Besides the Powell speech coming up in a half-hour, we have a bunch of economic data to contend with this morning. Revised GDP for Q2 showed a modestly lower decline than expected (-31.7% vs -32.5%). Initial jobless claims were essentially right in line with forecasts, although continuing claims were higher than expected.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, economic data out of Europe and Asia, trends related to the COVID-19 outbreak, and much more.
August is on pace to be a month unlike any other for the S&P 500 over at least the last 25 years. Through Wednesday’s close, the S&P 500 tracking ETF (SPY) was up 6.4% month to date. Even more impressive than the gain, though, has been the consistency of the rally. So far this month, SPY has only finished the day lower three times in eighteen trading days. That’s an 83% win rate!
How does that stack up to history? The chart below shows SPY’s percentage of up days by month dating back to its inception in 1993. Not only has there never been a month with a higher percentage of up days, but there have only been six others where the percentage of up days even touched 75%. There are still three trading days left in August, but even if all three days finish lower, SPY will have finished higher on more than 70% of all trading days this month. Rallies like the one we have seen in August are obviously great if you are long equities, but enjoy them while they last because they won’t last forever.
Aug 26, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.” – George Soros
It’s been a relatively quiet pre-market session today as US futures are trading modestly above or below the flat line depending on the index. The economic calendar is also on the quiet side and there is very little in the way of major earnings reports on the calendar. The Gulf coast is on watch this morning as Hurricane Laura has been upgraded to a category 3 storm and is likely to intensify further.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
One characteristic of a stock market bubble is the near-universal belief that equities can only go higher. Based on yesterday’s weaker than expected Consumer Confidence report, not only are Americans worried about their overall economic well being, but they’re also not exactly bullish on the stock market. In the question where respondents are asked their views on the stock market, the percentage of respondents who expect stock prices to go up stands at just 36.5% while 34.8% expect the equity market to go down. When practically an equal number of US consumers expect stock prices to go up as go down, that hardly sounds like an investor base plagued with unbridled optimism.
Aug 25, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“You have people walking around with all the knowledge of humanity on their phone, but they have no idea how to integrate it.” – David Epstein – Range
Today’s quote of the day is one reason why Apple (AAPL) is the most valuable company in the world. Was it not for the original iPhone, who knows how the revolution in mobile computing would have played out? Now, we literally have a world of information at our fingertips. If only we knew how to use it properly, instead of twerking videos on TikTok or yelling at everybody who bothers us on Twitter, who knows what we could accomplish?
Futures are higher this morning as positive headlines concerning trade between the US and China has lifted futures. Positive China Trade headlines? That’s a blast from the past. With higher equities, US Treasuries are lower and oil is rallying as sentiment related to the trajectory of the COVID outbreak continues to improve,
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
Standard and Poors, the firm responsible for maintaining the composition of the Dow Jones Industrial average announced the most significant reshuffling of the index since 2013 that will take effect after the close on Monday. Salesforce.com (CRM) will replace Exxon Mobil (XOM), Amgen (AMGN) will replace Pfizer (PFE), and Honeywell (HON) will replace Raytheon (RTX). The changes will take effect at the open on August 31st and will also coincide with Apple’s (AAPL) 4-1 split. In the table below, we summarize the Dow as it now stands with each component’s weight in the index and how those components and weights will change effective 8/31.
The biggest change effective 8/31 will not even involve one of the components being added or removed. Because the DJIA is weighted by each company’s share price, once AAPL’s split becomes effective, its weight in the index will drop from 12.20% down to 2.99%. This is an interesting shift because so far this year AAPL’s 71% gain has had a positive impact on the DJIA of 1,455 points. After the stock splits, AAPL’s total weight in the index will only be 2.99%, or the equivalent of 846 points. In other words, AAPL could go to zero between next Monday and year-end and its impact on the DJIA for the year would still be a gain of over 2%! Stock splits may be meaningless in terms of a company’s fundamentals but for a price-weighted index like the DJIA, they can have a large impact! That and the fact that the index only has 30 components is one big reason why much less money is indexed to the Dow than the S&P 500.
Besides the AAPL split, the other notable aspect of the index reshuffling is that the average share prices of the stocks going into the index are four times higher than the ones going out. As a result, AMGN will go into the index with the third-highest weighting, CRM will have the fifth-highest weighting and HON will be the ninth highest-weighted component.
After next week’s changes, there will also be some significant shifts in sector weightings for the DJIA. Technology will still have the largest weighting at 23.1% but will still see its share of the index decline by the largest amount (4.6 percentage points). Behind Tech, Energy is the only other sector that will see its weighting decline by more than a full percentage point, falling from 3.1% down to 2.1%. On the upside, Health Care’s weighting will increase by 4.4 percentage points, rising from 14.2% up to 18.6%, while Industrials will see its share increase from 13.2% up to 15.3%. Given the fact that it’s called the Dow Jones Industrial Average, it only makes sense that the Industrials sector will see its share of the index increase. Maybe one day it will see its share increase even more or the index will change its name to the Dow Jones Technology Index.
Aug 24, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“Behind every stock is a company. Find out what it’s doing.” – Peter Lynch
Sundays may be for “Meet the Press”, but if its Monday, it’s a market rally. US futures are following the rest of the world higher this morning with all the major averages looking at gains of nearly 1% at the open. European equities are even stronger with most benchmarks trading up over 2%. Breadth, which has been a nagging issue in the US over the last couple of weeks, is strong in Europe with advancing stocks outnumbering decliners by more than 9-1.
News driving stocks higher today is mostly due to hopes of a fast-tracked vaccine by as soon as Election Day. The economic calendar is quiet to kick off the week. The only US data point is the Chicago Fed National Activity Index which came in well below forecasts. Economists were expecting a headline reading of 3.70 for July, but the actual reading came in at just 1.18. We would note, though, that June’s reading was revised sharply higher (from 4.11 up to 5.33).
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
In this “Monday rally” for US equities, the Nasdaq 100 is on pace to open up roughly 1%. A gain of that magnitude is right in line with what has become the norm over the last several weeks as the index has traded higher by at least 1% on eight of the last ten Mondays. The only exceptions were on 7/13 (-2.2%) and 8/10 (-0.55%). A 1%+ gain today would make it nine of eleven.
Given all the focus on narrowing breadth in the market lately, we wanted to see if that trend was evident during these Monday rallies as well. The chart below shows the number of advancing issues in the Nasdaq 100 on each of the days listed above. For the eight Mondays days in the last ten weeks where the Nasdaq 100 rallied more than 1%, the average number of advancing issues per day was 78.5, but each of the last two saw daily readings of just 72. Additionally, the last two occurrences rank as tied for the second weakest of the eight prior days. Based on these two factors, it’s certainly valid to say that breadth has been narrower more recently. At this point, though, it’s hardly a glaring divergence, and unless we were already looking for signs of narrow breadth in this relationship, it probably wouldn’t have stuck out.
Aug 21, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“An investment in knowledge pays the best interest.” – Benjamin Franklin
The Democrats have had their turn, and now the attention will turn to the Republican Party next week. After that, the race starts! Whether it was the fact that the convention was confined to the virtual world or something else, the typical bounce that a ticket sees during their convention hasn’t materialized this year. In the last week, Biden’s odds for winning the election in November have actually declined a bit, while the odds of the Democratic party taking control of the Senate have seen a larger drop, falling from 61.2% down to 56.3%. The lack of a bounce is good news for Republicans, but with their convention also taking on a more subdued tone next week, there’s no guarantee that the Trump ticket will see a bounce either.
In markets this morning, futures have been dropping all morning and aren’t far from their lows of the day. While Asia was positive overnight, European equities started the day modestly lower and have been weakening all morning. Weak economic data in Europe and trade issues with China are all weighing on sentiment.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, updated flash PMI readings for August, trends related to the COVID-19 outbreak, and much more.
For a month that usually isn’t great for the market, this August has been shaping up just fine. Through Thursday’s close, the S&P 500 was up 3.5% so far in August. For the first 20 days of August, this month has been the strongest since the 4.26% gain in 2000, and going back to 1945 there have only been eleven other August months that saw a stronger performance in the first 20 days of the month.
