Dec 27, 2023
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“Chance favours the prepared mind.” – 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.
While the US was open for trading yesterday, most international markets are only reopening from the Christmas holiday today, and the overall tone has been positive as several major Asian markets were up 1% or more overnight. The tone in Europe is also positive, although it has been more subdued. Here in the US equity futures are about as close to unchanged as possible. Treasury yields are lower across the curve and around the world while crude oil is lower and gold and copper are trading higher.
It’s been a great rally for US stocks over the last two months, and more recently over the last week, stocks around the world have been performing just as good if not better than here. While the S&P 500 tracking ETF is up 0.76% over the last week, all but two of the eighteen regional ETFs we track in our Trend Analyzer have performed even better, and more than half of them are further extended relative to the 50-day moving average (DMA) than SPY which is 6.83% above that level. As shown in the image below, all of the 18 ETFs are also uniformly situated relative to their trading range at ‘Overbought’ levels (1+ standard deviation above their 50-DMAs). It’s hard to get more uniform than that!
Regarding each ETF, most of the regional ETFs are also trading right at 52-week highs (charts with green borders) while just four are shy of their one-year highs. It’s been somewhat of a can’t lose environment for equity investors over the last couple of months, and while it won’t last forever, enjoy it while it lasts.
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Dec 26, 2023
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“This century hasn’t got the lock on insanity.” – William Peter Blatty, The Exorcist
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 hope you all had a great holiday weekend, and for those who are back to work, it’s going to be a quiet day in the markets as much of Asia, all of Europe, and Canada are closed in observance of Boxing Day. Futures have a modestly positive bias, and crude oil is trading up close to 2% in the session.
Investors in just about every asset class outside of Energy have had a great end to the year, and the rally in US Treasuries has been among the most impressive. At the long end of the Treasury curve, the iShares 20-Year Treasury ETF (TLT) has rallied over 15% from its lows since late October. In the twenty-year history of the ETF, there have been only five other periods where the ETF rallied as much or more in 50 trading days. The three most notable were during the Financial Crisis, in 2011 right around the time of the US debt downgrade by S&P, and then again in March 2020 at the time of COVID. Admittedly, each of those rallies was significantly larger, but what makes the current period notable is that it followed what had been a historically large 15% decline in a 50-trading day span that ended in early October. Never in the ETF’s history has it shifted so fast from one extreme to the other.
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Dec 22, 2023
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“The clash of ideas is the sound of freedom.” – Lady Bird Johnson
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 you’re planning on flying somewhere in the next week, you’re going to have a lot of company. According to AAA, a record 39 million Americans will travel by air this holiday season, topping the prior record in 2019. That means that millions of Americans will be going through the ‘odorous’ process of taking their shoes on and off just to get through airport security, and we can all thank the ‘shoe-bomber’ who attempted to light his explosive-laden sneakers on fire while on a flight from Miami to Paris on this day in 2001. Thankfully, alert crew members and passengers aboard that flight were able to restrain the shoe-bomber, but even though he was unsuccessful, we’re all still paying the price 22 years later.
Dow futures are making it look like a moderately negative morning for equities on this last trading day before Christmas, but those numbers are skewed by Nike (NKE) which is trading down over 12% in reaction to weak earnings after the close yesterday. If NKE’s current declines carry through to the closing bell, it would be the second worst one-day reaction to earnings for the stock in at least 20 years, and if it finishes the day down more than 12.8%, it will be its worst earnings reaction day since at least 2001.
S&P 500 and Nasdaq futures are flat, treasury yields are lower, and crude oil is modestly higher. That could all change after 8:30 given the slug of economic data on the calendar that includes Personal Income, Personal Spending, PCE Deflator, and Durable Goods. Then, at 10, we’ll get New Home Sales and Michigan Sentiment. After that, there’s not a lot on the calendar, so expect things to slow down for the remainder of the day, but don’t forget to be on the lookout for a CNBC appearance at 11: 30 and our Year End report which will be posted and sent out later today.
The last week of the year has traditionally been thought of as a positive time for stocks, and for the most part that has been true. Over the last 20 years, though, median returns haven’t been nearly as positive. As shown in the chart below, while the S&P 500’s median post-WWII performance during the last week of the year has been a gain of 0.59% with gains just over two-thirds of the time, over the last twenty years, the median gain has been just 0.02% with gains half of the time.
On the right side of the chart, we have also summarized the S&P 500’s performance under various performance scenarios like this year. In the 19 years since 1945 that the S&P 500 was up 20%+ heading into the last week of the year, its median performance in the last week was a gain of 0.85% with gains 79% of the time. Similarly, in the 23 years when it was up 2.5%+ MTD, its median performance in the last week of the year was also a gain of 0.85% with gains 78% of the time. Lastly, in the eight prior years that the S&P 500 was up 20%+ YTD and 2.5%+ MTD, its median performance in the last week of the year was a gain of 1.24% with gains seven out of eight times.
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Dec 21, 2023
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“There was no established way for a man to tell his wife he was going to the moon. A man could tell his wife he was going to sea or going to war; men had been doing that for millennia. But the moon? It was a whole new conversation.” – Apollo 8: The Thrilling Story of the First Mission to the Moon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Treasury yields are doing little this morning and equity futures are looking to reclaim some of yesterday’s afternoon weakness. Crude oil and copper are modestly lower, while gold is flat. In Europe, stocks are lower as markets there closed before yesterday’s afternoon reversal. On the economic calendar, there’s a ton of data to be on the lookout for including revised GDP, Personal Consumption, Core PCE, jobless claims, Philly Fed, Leading Indicators, and finally the KC Fed report at 11 AM.
It was a tale of two markets yesterday. In the morning, the S&P 500 rallied to new 52-week highs only to give it all back and more in the afternoon. By the time the closing bell rang, stocks were at the lows of the day and finished down over 1%. There aren’t many places in the world where you can go skiing in the morning and swim in the ocean in the afternoon, but the market did its version of that yesterday.
While yesterday’s reversal was jarring, in the context of a daily chart of the S&P 500 ETF (SPY), it barely looks like anything more than a blip. Even after yesterday’s decline, SPY is more than 5% above its 50-day moving average (DMA) and more than 8% above its 200-DMA.
While yesterday’s reversal doesn’t look like much on a one-year chart of SPY, in the ETF’s history dating back to 1994, reversals of that type have been incredibly uncommon. The last time the ETF traded at a 52-week high on an intraday basis but finished the session down over 1% was back in April 2014, and in the ETF’s near-30-year history, there have only been seven other occurrences before yesterday. In the chart of SPY below, we have marked where each of those prior reversals occurred with a red dot. As shown, none of the prior occurrences marked a significant top for the market. In today’s Morning Lineup, we provided an analysis of SPY’s performance following prior reversals. Sign up to read the entire report.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
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Dec 20, 2023
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“What good is the warmth of summer, without the cold of winter to give it sweetness.” – John Steinbeck
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 finally starting to get colder here in the northeast, and that coupled with the shorter days quickly makes us miss the warmer weather and longer days of the summer. While the temperature is likely to only get colder from here in the coming weeks, if there’s any consolation, tomorrow is the shortest day of the year which means that the days only get longer from there. Applying the forward-looking nature of the market, winter is over!
Traders are coming in today to the warmth of red on their screens as equity futures and treasury yields are both lower. On the economic calendar, we’ll get Existing Home Sales and Consumer Confidence at 10 AM. On the earnings front, the notable reports since yesterday’s close were FedEx (FDX) and General Mills (GIS). Both stocks are trading lower in reaction to their results after management from each company lowered guidance. FDX is getting hit the hardest, though, as the stock is down over 10% and GIS is down 4%. If the declines in FDX hold through the close, it will be the stock’s worst earnings reaction day performance since December 2019.
Like the warmth of summer, it’s hard to fully appreciate a rally without first going through some weakness, and that made the late summer/early fall correction the perfect prelude to the current year-end rally. Heading into today, the Nasdaq has seen nine straight days of gains which is the longest winning streak since – wait for it – November 8th. That’s right. Since the October lows, the Nasdaq has now had two separate nine-day winning streaks. To find a time when there were two winning streaks of nine or more days in closer proximity to each other, you have to go back to 1979!
In the history of the Nasdaq dating back to 1971, it has had 48 different winning streaks of at least nine days. While they aren’t particularly uncommon, what makes the current streak a little more unique is that it has also come as the Nasdaq closed at overbought levels (1+ standard deviation above 50-DMA) on each day of the winning streak. Of the 48 prior streaks, only 16 shared that same trait with the current streak. In today’s Morning Lineup, we provided an analysis of the Nasdaq’s performance following prior nine-day winning streaks along with nine-day winning streaks that occurred when the index closed at overbought levels on each day of the streak. Sign up to read the entire report.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
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Dec 19, 2023
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“It is always the person not in the predicament who knows what ought to have been done in it, and would unquestionably have done it too” – Charles Dickens, A Christmas Carol
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 Dow and the Nasdaq are both on pace for their ninth straight session of gains, and this morning’s data on Housing Starts and Building Permits hasn’t done anything to change the direction. Building Permits were ever so slightly weaker than expected, but Housing Starts came in significantly better than expected coming in at 1.56 million compared to forecasts for a level of 1.36 million. If these pre-market gains in futures hold, it will further reinforce the point that good economic news is good again now that the Fed has pivoted away from rate hikes.
The energy sector was always the fuel to power the industrial economy, but in the digital economy, it has taken a back seat to technology. An example of the shifting role of each sector is the fact that in 1990, Energy accounted for 13.4% of the S&P 500’s market cap or more than twice the 6.3% weighting of the Technology sector. Today, Energy accounts for just 4.7% of the S&P 500’s market cap compared to Technology’s 27.9% weighting.
While most stocks are positively correlated with each other, there has been little correlation between Technology and Energy in recent years, and the last two years provide a perfect example. The charts below show the annual returns of the Energy and Technology sectors since 1990. In 2022, Energy had its best year since at least 1990, rallying 59.0%. Technology, meanwhile, cratered 28.9% for its worst year since 2008 and its fourth worst year since at least 1990. This year (through 12/18), we have seen the opposite pattern playout as Energy has declined 4.3% while Technology has rallied 56.3% for its best year since 2009 and its fourth-best year on record.
Looking at a comparison between the performance of the two sectors a little more closely, the chart below shows the annual performance spread between Technology and Energy for each year since 1990. Last year, Technology underperformed Energy by the largest amount since at least 1990, but this year it is outperforming Energy by the fourth largest margin on record. Additionally, there have been more years (6) in the last ten where the direction of Energy was the opposite of Technology than there were in the prior 24 years (5). Like oil and water, Energy and Technology just don’t mix.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
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