Bespoke’s Morning Lineup – 7/10/20 – Socially Distant Stocks

Jul 10, 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.

It’s going to be a dismal day on Wall Street both literally and figuratively as “Tropical Storm” Fay moves up the east coast, and futures are firmly lower.  Earnings news continues to be slow, but that will pick up next week as the big banks start to report.  In terms of economic data, PPI is the only release on the calendar, and that came in weaker than expected on both a headline and core basis.  That leaves us with the latest state by state COVID updates to contend with heading into the weekend.

Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, an update on the Federal Reserve’s balance sheet, credit growth in China, global and national trends related to the COVID-19 outbreak, and much more.

Every weekend it seems we see pictures from all over the country of people failing to follow guidelines on social distancing. While a lot of Americans seem unable to keep a modest distance between each other when they’re out and about, it hasn’t been a problem for equities.  In yesterday’s trading, the cap-weighted S&P 500 fell 0.56%, while the equal-weighted index performed much worse, falling more than 1.60%.  That’s a pretty wide gap!

We’ve seen a number of days this year where the performance gap between the two indices was as wide as yesterday, and on some days it’s been the equal-weighted index outperforming the cap-weighted index while on other days the performance gap has been flipped around.  For the entire year, though, it’s been the cap-weighted index outperforming the equal-weighted index as investors continue to gravitate towards the mega-cap stocks like Apple, Microsoft, Amazon, Alphabet, etc.  This has subsequently pushed the performance disparity between the two indices towards extreme levels.

To illustrate, the scatter chart below shows the YTD performance between the S&P 500 equal-weighted index (horizontal axis) and the cap-weighted index (vertical axis) through 7/9 for every year since 1991.  Normally, there is a pretty positive correlation between the two indices as the dots tend to hug the trend line.  In the case of 2020 (red dot),  though, we’ve seen a pretty major disparity as the dot is nowhere near the trendline (Equalweighted index down 13.04% YTD compared to a YTD decline of 2.44% in the cap-weighted index).

Another illustration of the performance disparity between the two indices can be seen in the YTD performance spread between the two indices.  The chart below shows the spread between the YTD performance of both indices by year since 1991.  When the bars are positive it indicates that the cap-weighted index is outperforming the equal-weighted index and vice versa for negative readings.  At a current spread of over ten percentage points, there has never been another year where one of the indices was outperforming the other by a wider margin.

Bespoke’s Morning Lineup 7/9/20 – Europe Still Lags and China Charges Ahead

Jul 9, 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.

It’s been a quiet session overnight, and futures are currently indicating a flat open in the S&P 500 and a positive open in the Nasdaq (what else is new?).  The big story overnight has definitely been the rally in Chinese equities.  While the CSI 300 opened down slightly at the open, it immediately rallied into positive territory and finished up over 1%.  Today’s gain not only marks the 8th straight day of gains but also the 8th straight day where the index has rallied more than 0.5%.  In the history of the CSI 300 (since 2002) the only other time the index saw that many consecutive gains of more than 0.5% was back in April 2007, right in the middle of that massive bubble.

Shifting focus back to the US, the key indicator to watch today is Jobless Claims at 8:30.  Consensus expectations are for 1.375 million which would be down from last week’s reading of 1.427 million. That would extend the record streak of w/w declines up to 14.  Despite that record run of w/w declines, in the last ten weeks, Jobless Claims have been higher than expected nine times.  Talk about threading a needle!

Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, auto sales in China, global and national trends related to the COVID-19 outbreak, and much more.

As you’ve seen each day in the Morning Lineup, case counts and hospitalizations in the US have only been trending higher over the last few weeks.  While conditions haven’t improved in the US, you’ve no doubt seen the trends in Europe, which have been improving.  Given the diverging paths of the outbreak on each side of the Atlantic, we’ve seen parts of the US rollback re-opening while Europe continues to move forward.

Against this backdrop, you would think the European economy and equity markets would be doing better than the US, but at this point that hasn’t been the case.  The chart below shows the performance (in dollar-adjusted terms) of the S&P 500 and Europe’s STOXX 600 since both indices bottomed on 3/23.  In the three and a half months since the low, Europe’s STOXX 600 is up an impressive 37.8%.  Over that same span, though, the S&P 500 is up over 41%! Now, when we’re talking such large numbers, a difference of less than four percentage points doesn’t seem like much, but it seems a bit surprising that US equities are even outperforming at all.  Unless the market has it wrong, the message it’s sending is that looking out six to nine months, the US will find itself in a better place than Europe.

Bespoke’s Morning Lineup – 7/8/20 – Wednesday Lull

Jul 8, 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.

With earnings season not kicking off until next week, it’s an unusually quiet day in terms of data as there are no major earnings reports to speak of and the economic calendar is pretty much empty.  Futures are modestly higher as we type this and have been vacillating above and below the unchanged level all morning.  Gold is rallying to its highest levels since 2011, and copper isn’t far from 52-week highs.

Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, auto sales in China, global and national trends related to the COVID-19 outbreak, and much more.

Nasdaq futures are up considerably more than the S&P 500 this morning, continuing a trend of outperformance for the Nasdaq that has been in place for several months now.  The Nasdaq 100’s decline yesterday ended a streak of five straight days where the index was up at least 0.5%.  While that sounds impressive at face value, back in May, there was actually a streak of six trading days.  Prior to that streak, the last time the Nasdaq 100 was up more than 0.5% for five straight days was in June 2019, and before that, you have to go all the way back to 2011 to find the last streak before that.

After five straight days of gains, one might think that the Nasdaq 100 was getting ahead of itself, and while a short-term pullback may be in the cards, these streaks of 5 or more days of 0.5% gains have been relatively common throughout the Nasdaq 100’s history.  As shown in the chart below (on a log scale where each label on the y-axis represents a doubling in price), while there were a couple of occurrences near the 2000 peak, there were also loads of similar streaks in the entire runup of the 1990s.