Jan 5, 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.
“It took two decades and two hundred million words to convince people the bridge was feasible.” – Joseph Strauss, Chief Engineer of Golden Gate Bridge
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
If the action in Europe and pre-market futures is any indication, we’re on pace to o-fer the week. That would extend the losing streak for the S&P 500 to five days and the Nasdaq and Russell 2000 to six. Before we get ahead of ourselves, though, there’s still a full day of trading left ahead, and how we end the day will in large part be impacted by the 8:30 release of Non-Farm Payrolls and the 10 AM release of ISM Services.
After closing within 0.30% of its record high last Thursday, the S&P 500 has embarked on what is now a four-day losing streak. We got so close, and yet now those record highs seem so far away (even if we are still within 2% of that record). The fac that the S&P 500 traded at a 52-week high and then proceeded to fall for five straight days doesn’t instill a lot of confidence, and a look at recent history will show you why. Looking at the S&P 500 since the start of 2020, this most recent period is the third time that the S&P 500 closed at a 52-week high that was then followed by at least four straight days of declines. The other two occurrences were on July 31st, right before the S&P 500 began its late summer swoon, and then on 1/3/22, which marked the peak of the post-COVID bull market. Happy Friday!
While the last two occurrences certainly weren’t positive, if we widen our perspective, the declines that followed those two most recent occurrences were more of an exception than the rule. Extending the chart out to 2020 shows that while there was another occurrence right at the pre-COVID peak in February 2020, from late 2020 through 2021, there were multiple occurrences that, in hindsight, are barely noticeable.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Jan 4, 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.
“Nature is pleased with simplicity. And nature is no dummy” – Isaac Newton
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Isaac Newton was born on this day in 1643, and markets appear to be celebrating his birthday with their rediscovery of gravity after last year’s rally in the final two months of the year. Analysts have also been getting in on the act as there have been as many downgrades of Apple (AAPL) in the first three trading days of the year (3) than there were in the entire fourth quarter of 2023.
Equity futures have been trading with a modestly positive bias this morning which marks a shift from the last two days where declines in Europe have pushed futures in the US lower. This morning’s economic slate includes the ADP Employment report which came in higher than expected at 164K versus forecasts for an increase of 115K. Jobless claims were also just released and on both an initial and continuing basis, the numbers were better than expected.
With a decline of 0.80% yesterday, the S&P 500 posted back-to-back declines of 0.50% or more to start the year for just the fifth time on record. Wasn’t the start of the year supposed to be strong? As we’ve noted in various seasonality analyses, while the S&P 500’s long-term performance in January has been strong, in more recent history that has not been the case. In any event, regarding the back-to-back declines, you have to go back to 2005 to find the last occurrence and the only three others were in 1980, 1991, and 2000.
In the table below we show the performance of the S&P 500 for the rest of January and the rest of the year in each of those four years. For the rest of January, the S&P 500 bounced back big in 1980 and 1991 and saw just modest declines for the rest of the month in 2000 and 2005. For the remainder of the year, performance varied widely as well. In both 1980 and 1991, the S&P 500 posted gains of more than 29% for the rest of the year while in 2000 it fell nearly 6% while in 2005, it rallied 5%.
A sample size of four is admittedly small, and the fact that there was no clear trend of performance going forward doesn’t shed much light on what to expect for the remainder of the year. Not only that, but whereas each of the declines this year were less than 1%, in each of the four other periods, the magnitude of the decline was much larger.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Jan 3, 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.
“There are two days in my calendar: This day and that Day.” – Martin Luther
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 not for another month, but it’s starting to feel a bit like Groundhog Day as futures are once again pointing to a lower open on the day. If you’re looking for a scapegoat, the other side of the Atlantic may be a good place to start. The charts below show overnight market action combining intraday trading in Asian and European markets along with US futures. The chart on the left shows overnight trading from Monday night into Tuesday while the chart on the right shows trading overnight into this morning. In each case, the pattern has been the same. Up until Europe opened, there wasn’t much going on, and while stocks on the continent briefly rallied to start the day, sellers quickly came in and overwhelmed any positive sentiment.
This morning in the US, several catalysts could either break the trend or accelerate it. At 10 AM, we’ll get the December ISM Manufacturing report which is expected to come in below 50 for the fourteenth straight month and is the longest streak in over 20 years. Along with that report, the release of JOLTS for November is expected to increase modestly after last month’s much weaker-than-expected report. Besides those two reports, we’ll get the FOMC minutes at 2 PM.
Yesterday may not have been an especially positive start to a year, but it probably wasn’t as bad as the headline declines in the S&P 500 and Nasdaq would suggest. While the Nasdaq’s 1.63% decline was the fourth worst start to a year for the index on record, and the S&P 500’s 0.57% decline was steep in its own right, overall breadth on the S&P 500 was slightly positive (+19), and the equal-weighted S&P 500 was barely down on the day (-0.03%).
At the sector level, things weren’t so bad either. You probably wouldn’t believe it, but four sectors rallied over 1% and two other sectors were up on the day. Outside of Technology (-2.62%) and Industrials (-1.01%), no other sector ETF declined more than 1% on the day.
Yesterday’s best-performing sector was Health Care as the sector ETF rallied 1.76%. While the sector was a big laggard in 2023, it appears to be making up for lost time in the new year as the stock convincingly broke out above the upper end of its 2023 trading range.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Jan 2, 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.
“Intelligence is an accident of evolution, and not necessarily an advantage.” – Isaac Asimov
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
2024 is not picking up where 2023 left off as futures are sharply lower with the Nasdaq indicated to open the year down over 1% and the S&P 500 down 0.8%. Things weren’t as bad overnight, but the sellers appeared to step in just after Europe opened for trading. While an earthquake in Japan over the weekend and geo-political concerns in the Middle East haven’t helped concerning this morning’s market picture, they wouldn’t account for such a large decline at the open. The more likely culprit is simply a round of profit-taking after a monster rally to close out 2023.
The economic calendar in the US is light today with the S&P Markit Manufacturing PMI at 9:45 and Construction Spending at 10 AM. PMI readings for the rest of the world that have already been released were generally slightly better than expected even as the manufacturing sectors for Europe’s largest economies remain in contractionary territory.
One area of the market not feeling the pressure this morning is Bitcoin. After a rally of over 150% in 2023, the world’s largest cryptocurrency isn’t skipping a beat in 2024 as it’s already up over 7% YTD and above $45K. Bitcoin traded in a bit of a sideways range from early December through the end of the year, but a rally in the first two days of the new year has helped it to clear resistance and reach new 52-week highs.
From a longer-term perspective, bitcoin is still well off its record highs from late 2021, but it has also essentially erased all its losses from 2022. There’s still plenty of overhead resistance above, but with $45K cleared, $50K, a level it has only crossed above or below 16 times, will be the next area to watch.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 29, 2023
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.
“You can’t be brave if you’ve only had wonderful things happen to you.” – Mary Tyler Moore
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Anyone long the stock market (even small caps after the last two months) will be sad to see this year come to an end, but time moves on, and so do investors. The year ended on a positive note in Asia and Europe, but here in the US equity futures are looking more subdued. The only report on the calendar today is the Chicago PMI report for December. You may recall that last month’s report was much better than expected coming in at a level of 55.8 versus forecasts for a reading of 46.0, ending what had been an extended streak of readings below 50. This month, economists are forecasting a level of 50.0 on the nose, but if the reading can top that level it will help lend some credence to the idea that the manufacturing sector is exiting its multi-month slump.
After a rough late summer/early fall stretch, investors have had nothing but wonderful things happen to them over the last two months. At the rate this week is going, both the S&P 500 and the Nasdaq are on pace to close higher for the 9th straight week. There’s still a day left of trading, and we don’t want to jinx it, therefore, the bar for this week in the chart below is colored in light red. Since the Nasdaq’s inception in 1971, there has only been one other period where both indices had concurrent streaks of nine straight gains, and that was in late 1985 when a streak of gains lasted eleven weeks.
Looking at each index individually, returns following nine consecutive weeks of gains have generally been better than average.
For the S&P 500, there have been nine prior nine-week winning streaks since 1952 (when the five-day trading week in its current form began), and while performance over the next week was negative on a median basis, and performance was down more often than it was up, median returns for the next one, three, six, and twelve months were better than the long-term average for all periods since 1952.
While the Nasdaq has only been around since 1971, it has had more nine-week winning streaks than the S&P 500, and of the fourteen prior streaks, ten extended to ten weeks. Looking ahead, median returns over the following one, three, and twelve months were positive and better than the long-term average, but six months later, the median gain of 3.67% was well below the 6.02% average for all six-month periods since 1971.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 28, 2023
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.
“There are no traffic jams along the extra mile.” – Roger Staubach
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 another slow morning in the markets as the pace of data has been slow. The only reports of note on the calendar this morning were Wholesale Inventories, which fell 0.2% on a m/m (right in line with forecasts), and jobless claims. Initial claims were slightly higher than expected (218K versus 210K) while continuing claims increased modestly to 1.875 million which was in line with consensus forecasts. Equity futures are modestly higher for the S&P 500 while the Nasdaq is indicated to open up 0.26%. There’s a small positive bias to yields, but nothing indicating conviction. One other item worth noting is that while the S&P 500 is within spitting distance of a record high, individual investor bullish sentiment declined this week falling to 46.3% from 52.9% and the lowest level since 11/23.
With just two trading days left in the year, the market is on the verge of history. After being written off for dead in the last year, the traditional 60/40 portfolio of 60% stocks and 40% bonds is within a whisker of its best two-month rally since at least 1990. The chart below shows the rolling two-month performance of a 60/40 portfolio using the S&P 500 total return as the stock portion and the Bloomberg Aggregate Bond Index total return as the bond portion. With a gain of 12.16% over the last two months, the current period just surpassed the two-month rally coming out of Covid (May 2020), and the only other period that was better for the strategy was the two months ending in April 2009. Back then, the strategy rallied 12.25%, so if the next two trading days even see marginal gains, the current rally will set the record.
What makes the current period so much different than the other two cited above is where the gains have come from. Let’s start with the stock portion of the strategy. In the current period, the S&P 500 is up 14.35% over the last two months, which is certainly strong relative to history but not anywhere close to a record. In May 2020, the two-month gain was 18.19% and in April 2009 it was 19.17%.
What has stood out in the last two months is how strong the bond portion of the strategy has been. Back in 2009, the bond leg was up just 1.87% while in May 2020 it was up 2.25%. During this current period, bonds have rallied an unprecedented 8.87% which far exceeds any other two-month period since at least 1990. Since they are meant to act as the ‘insurance’ leg in times of market weakness (although it wasn’t the case in 2022), bonds tend to always underperform stocks during periods when the equity market rallies. While they still underperformed stocks in the last two months, they have never acted as a smaller drag on the strategy during a period of strength.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
