Dec 31, 2024
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“the cause of the disease is not clear.” – China People’s Daily, 12/31/2019
To view yesterday’s CNBC segment, you can just click on the image below.
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Of the international markets that are open for trading on this last day of the year, it’s been a mixed session. In Asia, China’s Manufacturing PMI came in weaker than expected, barely hanging onto growth at 50.1, and in Korea, CPI for December rose 0.4% m/m, double consensus expectations. In Europe, the STOXX 600 is up about 0.25%, but Germany and Italy are closed while other major exchanges will have early closes. Here in the US, futures are looking to close out a lousy December on a positive note, and the only economic report on the calendar is an October update of Case Shiller Home Price indices. While the tone is positive, barring a major rally, the S&P 500 will close out the month with a decline of over 1%.
It started five years ago today with a short statement from China about a flu outbreak in a market that most people had never heard of. Whatever. What’s everyone’s plan for New Year’s? More stories started to show up on Drudge Report in the following days. Coronavirus? Who’s got limes? As January continued, the story picked up steam. Hey, you hear about that flu-thing in China? On January 20th, the first case in the US showed up in Washington State. Wow! But they probably got it in China. Three days later, China put the entire city of Wuhan, a population of 11 million under complete lockdown, and pictures started circulating of trucks driving down the streets spraying disinfectant into the air. What? They would never do something like that here! Then, people started getting sick on cruise ships. People always get sick on cruise ships. What else is new? Then, more cases started to show up in Arizona, California, and other parts of the country, and there was also a breakout in Italy. Maybe I should have bought some of those masks after all. From there, the case counts started to explode, and markets sold off. Where can I find a roll of toilet paper? In early March, an outbreak in New Rochelle, NY resulted in the first US “containment zone” and then the shutdowns/lockdowns started. Within weeks schools and businesses across the country were closed. The skies were silent, highways were deserted, and the country was ‘masked up’ and closed for business. Wow. They really did do that here.
The first half of 2020 will likely go down as the strangest period of most people’s lives, and it will take decades for the full story and impact of Covid to be realized. In the markets, though, the reaction was swift. Equities initially rallied to start 2020 but peaked in mid-February. At its closing low in March 2020, the S&P 500 was down over 30% YTD, and at their respective lows in the first half of 2020, every sector was down at least 20% with three sectors – Energy, Financials, and Industrials – down over 40%. It was enough to make any investor with a retirement account sick, and some no doubt attempted to cut their losses and raise cast into the declines.
The pain in markets from Covid was short-lived, though, and showed once again that panicking in the markets rarely works out. While many sectors adapted and managed to thrive despite onerous restrictions, the flood of stimulus unleashed on the global economy drove the rebound. Through yesterday’s close, not only is every sector higher now than it was when Covid made its public debut, but the S&P 500 is up over 80%, and all but two sectors are up over 30%.
As shown in the chart below, the biggest winner has been Technology, and deservedly so. Without the technology that different parts of the economy utilized during and after Covid, the economy would have been in a much different place now. While no sector is down since the start of 2020, Real Estate has been the worst-performing sector with a cumulative gain of just 5.7%. The sharp increase in interest rates during this span has been the major culprit, but the fact that companies are still having trouble getting their employees into the office hasn’t helped either.
Dec 30, 2024
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“When people are intimidated about having their own opinions, oppression is at hand.” – Jimmy Carter
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Former President Jimmy Carter didn’t leave office as the most popular President, but his years after serving in the Oval Office helped to improve his legacy as one of the most admired men in modern American history. Since 1946, Gallup has run an annual survey asking Americans “What man that you have heard or read about, living today in any part of the world, do you admire most? And who is your second choice?” In the survey’s history, Billy Graham tops the list with 61 of the top 10 finishes. Ronald Reagan ranks a distant second with 31 top-ten finishes, but right behind him, Jimmy Carter ranks third with 29, slightly ahead of Pope John Paul II (27) and Bill Clinton (26). Living to just over 100, the 39th President lived a full life.
US futures were trading just modestly lower until shortly before 8 AM Eastern but have weakened considerably since then on little news. Overnight in Asia, Japan and Korea both ended their trading years on a negative note with Japan’s Nikkei down 1% and the Kospi down a more modest 0.2%. In terms of economic data, Japan’s Manufacturing PMI came in below 50 for the sixth straight month. Trading in Europe had been much more subdued than in Asia, but these indices have also seen a pickup in the selling as US futures rolled over. Here in the US, both today and tomorrow will be full trading sessions, and markets will be closed on Wednesday for New Year’s Day.
Getting back to the US, this morning’s weakness will put the S&P 500’s 50-day moving average back into play after it held that level on Friday. As shown in the chart below, the technical picture isn’t looking particularly positive as we close out the year. The index has been gradually trending lower since its peak on 12/6. What a difference a few weeks make.
Dec 27, 2024
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“A bottle of wine contains more philosophy than all the books in the world.” – Louis Pasteur
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Global equities are celebrating the last Friday of 2024 with broad-based gains after US stocks opened lower yesterday but finished around the unchanged level. In Asia, Japanese stocks rallied on reports that the BoJ was willing to be patient regarding its next rate hike. The only decliner in the region was South Korea which declined over 1% as political uncertainty continues. In Europe, stocks were closed for trading yesterday in observance of Boxing Day, and with just one day of trading before the weekend, activity is light. That hasn’t kept stocks in the region from rallying, though, and the STOXX 600 is trading nearly 0.5% higher.
The picture in the US isn’t as optimistic this morning as futures on the S&P 500, Nasdaq, and Dow are all down 0.30%. Treasury yields are higher again as the yield on the 10-year US Treasury tops 4.6%. The high for the year was just above 4.7% back in April, and if we reach that level in the days ahead, it could become problematic for stocks. Thankfully, oil prices have remained contained right near $70 per barrel while gold holds steady near $2,650 per ounce. Finally, Bitcoin has had a massive rally since the election, but for the last month now, it has moved sideways. At today’s level of around $96,700, Bitcoin is the same level now as it was on November 20th.
If a bottle of wine is full of philosophy, Americans have consumed increasingly less wisdom. Alcohol sales surged during Covid but pulled back as the economy reopened and people had to start working again. As if that wasn’t bad enough for sales, several other headwinds have lined up against the sector ranging from the growing popularity, legalization, and acceptance of cannabis, a renewed focus on health and wellness, declining popularity among younger generations, lack of affordability due to inflation, etc. Remember when it seemed like a different celebrity launched their own ‘artisanal’ tequila brand every week? You don’t hear those stories much anymore.
Given the issues facing the industry, it shouldn’t come as a surprise that companies selling booze have had a terrible year. Their weakness stands out even more relative to the overall market. As the S&P 500 closes out the year right near record highs with a YTD gain of over 25%, all six of the major public companies involved primarily in the sale of alcoholic beverages are down YTD, and three of them are right at or near 52-week lows.
Wine and other alcoholic beverages have been around for thousands of years. While recent quarters have seen sluggish sales, it’s unlikely that this will lead to the demise of the alcohol industry anytime soon. However, the factors contributing to these sales declines, don’t show any signs of ending soon. This raises the question: if Al Capone were alive today, would he even find the alcohol business as profitable as it was during Prohibition?
Dec 26, 2024
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“We’re developing a new citizenry. One that will be very selective about cereals and automobiles, but won’t be able to think.” – Rod Serling
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The bulls may have enjoyed a little too much eggnog yesterday. US equity futures are firmly lower across the board indicating declines of 0.3%. Treasury yields, gold, and crude oil are all fractionally higher while Bitcoin is under the most selling pressure with a decline of 4% as its attempt to bounce back above $100 fails for now.
The only economic report on the calendar this morning was jobless claims. Initial claims came in modestly lower than expected, but continuing claims were higher than expected and bounced back above 1.9 million.
As we noted on Tuesday, the S&P 500’s 1.10% gain was the best Christmas Eve performance for the index since 1974. The Nasdaq’s 1.35% rally was the second-best gain on the last trading day before Christmas and the third time it rallied more than 1%. As shown in the table below, in 2000 the Nasdaq rallied over 7% on the last trading day before Christmas. However, that came well after the dot-com peak when the index was in a stupid phase of volatility that the drawn-out election results only exacerbated. The only other year the Nasdaq gained more than 1% on the last trading day before Christmas was in 1991. Overall, there have been nine years that the Nasdaq rallied more than 0.75% on the last trading day before Christmas. In those years, the median rest-of-year gain from Christmas through year-end was 1.6% with positive returns five out of eight times.
Dec 24, 2024
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“I’m not a paranoid deranged millionaire. Goddamit, I’m a billionaire.” – Howard Hughes
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Below is a quick look at price charts for major US index ETFs from large-caps down to small-caps. Things have really taken a turn lower in small-caps, mid-caps, and the equal-weight large-cap ETFs. Both the S&P 500 Equal Weight ETF (RSP) and the Nasdaq 100 Equal Weight ETF (QQQE) have broken below the bottom of their six-month uptrend channels. However, the regular cap-weighted S&P 500 (SPY) and Nasdaq 100 (QQQ) ETFs have managed to hold onto their uptrends so far and are above their 50-DMAs.
With the market up 25% this year and no 10%+ corrections, we noticed yesterday that the S&P 500 has managed to close solidly above its 200-day moving average for the entirety of 2024:
Dec 23, 2024
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“A great industrial nation is controlled by its system of credit. Our system of credit is concentrated.” – Woodrow Wilson
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After days like last Wednesday, finding critics of the Federal Reserve isn’t hard. If you’re one of those critics, you can thank President Woodrow Wilson as he signed the Federal Reserve Act into law 111 years ago today. Even President Wilson later came to regret signing the bill into law with quotes like the one above. Hating on the Fed has been around almost as long as the Fed has been around!
With just a session and a half until the Christmas holiday, futures are in the holiday mood with a little red and a little green this morning; Dow futures are indicated modestly lower while the S&P 500 and Nasdaq are marginally higher. In fixed income, Treasury yields are modestly higher across the curve with larger gains at the long end as the 10-year yield has moved up to 4.56% while commodities are generally lower. Bitcoin prices are modestly higher, but at just below $96K is over 10% from its record high about a week ago.
The nightmare before Christmas ended (at least temporarily) last Friday as the S&P 500 equal weight index finally had a day where it closed the day higher than it opened and overall breadth in the S&P 500 was positive. The reversal also came at a critical point. The chart below of the S&P 500 equal weight ETF (RSP) shows how after last week’s Fed meeting, the index broke below short-term support that had been in place since Labor Day and moved into ‘extreme’ oversold territory for the first time in over a year. Friday’s rally arrested that breakdown, but to hold that support, we’ll need to see some follow-through in the days ahead.
