Sep 26, 2024
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“We can no longer afford to be second best. I want people all over the world to look to the United States again” – John F Kennedy
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures surged overnight with the Nasdaq indicated to be up nearly 1.5% while the S&P 500 is poised to open higher by 0.75%. The only major catalyst in the US was a strong earnings report from Micron (MU) which surged over 16% after reporting an earnings triple play. The big news once again came out of China where the government said that it would undertake the necessary spending necessary to meet this year’s growth targets. That was also accompanied by reports that the government was prepared to pump $150 bln into the country’s largest banks. All of this news pushed stocks in the country firmly higher for the third straight day of 1%+ gains, and the impact has dispersed out to the rest of the global equity market.
In Europe, stocks have piggybacked on the overnight gains out of China, and the STOXX 600 has rallied over 1%.
Here in the US this morning, it’s a busy day for economic data with revised GDP, Personal Consumption, Core PCE, Durable Goods, and jobless claims all at 8:30. The most notable of these in our view was initial jobless claims, which once again confirmed that the surge earlier this summer may have been more seasonal than anything else. The only other report on the calendar is Pending Home Sales at 10 AM. If all this economic data isn’t enough, there are a ton of Fed speakers scheduled to speak, so many in fact that we couldn’t even fit them all on page one.
After another strong night for Chinese stocks, the Shanghai Composite has now rallied over 9% in the last three trading days with a bulk of the gains coming on Tuesday and today, even as Wednesday’s gain was a not-so-modest 1.2%. As shown in the chart below, the current run ranks as the strongest since July 2020, and before that August 2015. During the financial crisis, there were multiple occurrences, and then before that, there were a handful of occurrences in the years after China entered the WTO at the end of 2001.
The chart below shows each time the Shanghai Composite rallied over 9% in three days with no occurrences in the prior three months. Besides the current period, there were only six other occurrences, and the two that stand out most came right in the middle of major bear markets.
Sep 25, 2024
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“I putt like I did when I was a kid. When you’re a kid, you’re not scared of anything.” – Arnold Palmer
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s a quiet morning in the markets so far as US equity futures are flat to modestly lower while US treasuries are modestly higher as they’ve steadily risen since the Fed cut rates last week. The only economic report remaining on the calendar this morning is New Home Sales, but weekly mortgage applications were released earlier today, and while overall applications were up 11% for the week, nearly all of it was related to refinancing activity which was up 20% compared to a gain of just 1% for purchase applications.
While 10-year yields seemingly rising every day since the Fed cut rates last week, gold is on pace for its sixth straight day of gains and its fifth straight record closing high. Gold surged earlier in the year before trading in a sideways range from April through July. Still, as summer wound down and the current easing cycle became more of a certainty, investors have been piling into the world’s oldest inflation hedge.
Looking at gold from a longer-term perspective, all-time highs in the price of gold have been relatively rare. Since 1976, it has closed at a record high on just 2% of all trading days, and they were generally concentrated into three periods. The first was in the late 1970s to early 1980. Then gold went another quarter century with no record highs. It wasn’t until the financial crisis and the Fed instituted its zero-interest rate policy that gold broke out above its 1980 peak, and those new highs continued until late 2011. During Covid, gold briefly hit another all-time high but traded in a sideways range again through the end of 2023. This year, though, the pace of new highs has been coming in heavy with 36 – or about an average of once a week. Put another way, with 36 new closing highs this year, 14% of all the record closing highs in the price of gold have occurred this year.
Of the 36 record closing highs in the price of gold this year, six have occurred this September (through 9/24), and that has helped to move September into second place for the month with the largest number of new closing all-time highs. That’s nearly the opposite of the S&P 500 where September has been the month with the fewest record closing highs. The only month with more is August, but with just four trading days left this month, August’s lead is safe for this year.
Sep 24, 2024
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“Show me a hero, and I’ll write you a tragedy.” – F. Scott Fitzgerald
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 see yesterday’s CNBC interview, you can just click on the image below.
Futures in the US are looking at modest gains this morning ahead of Case Shiller housing numbers at 9 AM and Consumer Confidence at 10 but the big news overnight came out of China where the PBoC announced several stimulus measures designed to boost the economy and the stock market. You have to check out the commentary section of today’s report for a full in-depth recap (you won’t find a better one). While the positive response by the equity market to the stimulus measures is more than warranted given the stops pulled overnight and could have some follow-through in the short term, we’re not quite convinced that “all” the necessary stops were pulled to make this the seminal event for a turnaround in the long-languishing Chinese equity market and economy
As mentioned, China’s overnight stimulus measures powered the Shanghai Composite to a rally of 4.15% for its best one-day gain since July 6th, 2020. As impressive as the gain was, it barely got the index above its 200-day moving average and only back to levels it traded at in late August. Since its recent high in May, the Shanghai Composite is still down 10%. You have to start somewhere, but Chinese stocks still have a way to go.
Looking at a longer-term chart, Chinese stocks have had some big bouts of volatility where they more than doubled in just a couple of years and then gave back all of those gains just as fast. What also stands out is how volatility in the country has subsided. Over the last five years, there have been just two one-day gains of 4%+ while in the five before that there were 14. Combining those two most recent five-year periods, there have been 16 one-day gains of 4% in the last ten years which is only slightly more than half as many as there were in the ten years before that (31)!
Sep 23, 2024
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“Show me a man with a million dollars, and I’ll show you a million guys trying to take it away from him.” – Mickey Rooney
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
We’re heading into the home stretch of September, and with the S&P 500 up nearly 1% on the month, bulls couldn’t ask for much better especially when you consider how things looked on the 6th. This morning, there’s not a lot going on and futures are trading little changed with S&P 500 futures down slightly and the Nasdaq up slightly. Treasury yields aren’t showing much direction either with the short-end of the curve unchanged while the 10-year yield is up just two basis points. The only economic data on the calendar is the Chicago Fed National Activity Index at 8:30 and flash September PMI readings for the Manufacturing and Services sectors at 9:45.
Getting back to September’s performance, last Thursday’s record closing high for the S&P 500 was notable not only for the fact that it was the first record closing high for the index since mid-July but also because it’s relatively uncommon for the S&P 500 to hit a record high in September. As shown in the chart below, since 1945, there have been fewer record highs in September (5.9%) than any other month. As shown in the chart below, the frequency of record highs tends to drift lower throughout the year with a ‘blip’ in July where just over 10% of all record highs have been recorded. November, however, stands out for having the highest frequency of highs at 11.8%, or twice the rate of September.
So, does a new record closing high in September bode well for the rest of the year? The chart below shows the S&P 500’s historical Q4 performance since 1945, and the blue bars indicate years when there was a record high in September. In the 21 prior years when there was a record high in September, the median rest-of-year performance was +4.7% with gains just over 90% of the time. That median gain is nothing to sneeze at, but it’s slightly less than the median for all years since 1945 (5.3%) although not quite as consistent to the upside (80%).
Sep 20, 2024
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“Winners train, losers complain. Give me twelve players that want to win, and they will find a way to win.” – Red Auerbach
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s been a strong week for equities, so the modestly negative tone in futures to start the last day of the trading week isn’t going to concern anyone. There’s also zero on the economic or earnings calendar this morning either, so we’re not quite sure what traders will latch onto to push prices in one way or the other, but they always seem to find something!
Overnight in Asia, traders closed out the week on a positive note as the Nikkei was up over 1.5%, Hong Kong finished 1.4% higher, and even China was up over 1%. The key event in the region was the BoJ keeping rates unchanged with a ‘hawkish hold’. In Europe, the tone isn’t as positive as the STOXX 600 is modestly lower as German PPI came in higher than expected while UK Retail Sales rose more than expected.
The Russell 2000 did not hit an all-time or even 52-week high yesterday, but it did manage to take out its late August high. The chart is forming what looks like a “W-formation” with the first half comprising the massive rally from earlier this summer when the index traded at the most overbought level on record for a major US index. We honestly have no idea what a W-formation means, but if the Russell 2000 manages to break out above the summer highs, it would be a positive development from a technical perspective.
The latest rally in the Russell 2000 has also been impressive given that yesterday was the seventh straight day of gains for the index which is the longest winning streak for the index in three and a half years. Seven-day winning streaks are by no means uncommon or extreme in the Russell 2000’s history. As shown in the chart below, since 1980 there have been 110 other winning streaks of at least seven trading days, and the longest was more than three times longer at 22 in March 1988. What is interesting about the chart below, however, is how common 7-day winning streaks were from 1980 through the dot com bust (86 from 1980 through the end of 2022) and how uncommon they have been since (24 since 2003).
In today’s Morning Lineup, we looked at how the Russell 2000 tends to perform following prior seven-day winning streaks. To see the rest of the analysis, sign up for a trial today!
Sep 19, 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.
“We did everything adults would do. What went wrong?” – William Golding. Lord of the Flies
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Historically, when the Fed started a rate-cutting cycle, equity market performance on the day of the first cut was very positive with an average one-day gain of 1.30%. Even that positive bias, however, wasn’t enough to counter the negative pull of the market on Fed days during current chair Powell’s tenure since 2018. As shown in the chart below, on Fed days under Powell, there has been a clear negative bias for equities in the final hour of trading, which was again on display yesterday. Even after rallying as much as 0.8% after the statement’s release communicating a 50 bps rate cut, stocks drifted lower and finished with a decline of 0.24% right near the day’s lows.
The negative pull of Powell’s law of gravity may have pulled stocks lower yesterday, but this morning, the S&P 500 is indicated to open sharply higher with the S&P 500 ETF trading up over 1.5% in early trading. If these gains hold through the opening bell, it would be the 16th time since 1994 that SPY has gapped up over 1% on the day after a Fed meeting (scheduled or unscheduled). In the chart below of SPY, we show each of those prior occurrences using blue (when there was no change in rates on the Fed day) and red dots (when there was a cut in rates). Of the 15 prior gaps higher, just four followed a day when the FOMC cut rates. Three of those were after the 2007 peak and through the Financial Crisis while the fourth was in early March 2020 during the early days of the Covid Crisis.
