Dec 8, 2023
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“How can I go forward when I don’t know which way I’m facing?” – John Lennon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
What was looking like a modestly positive day for stocks earlier has reversed modestly lower, but the reality is that there is little direction ahead of the Non-Farm Payrolls report at 8:30 AM. Also, don’t forget about the University of Michigan Sentiment report at 10 AM as well. Overnight in Asia, it was a mostly positive session, although Japan bucked the trend falling more than 1.7% for a 3.4% decline on the week. The culprit there was a weaker-than-expected GDP report coupled with stronger-than-expected inflation (the worst of both worlds). In Europe, the tone is modestly positive as German CPI was right inline with forecasts and employment data in France was stronger than expected.
It’s generally been a positive month so far for US stocks with some small exceptions – and another big one. Leading the way higher, Consumer Discretionary and Real Estate have both rallied more than 2% while Industrials and Utilities are both up over 1%. To the downside, Materials, Consumer Staples, and Technology have all seen modest declines, while Energy has plunged nearly 4%. As a result of Energy’s weakness, while every other sector remains in overbought territory heading into today’s employment report, Energy is not only below its 50-day moving average, but it’s also the only sector that’s oversold.
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Dec 7, 2023
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“With confidence in our armed forces with the unbounding determination of our people we will gain the inevitable triumph so help us God.” – Franklin D. Roosevelt
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 mixed start to the week for indices like the Nasdaq and Russell 2000 while the S&P 500 has been down for three straight days. This morning, futures are flat with a slight positive bias. Overnight in Asia, stocks traded lower on reports that the BoJ is gearing up for rate hikes. That led to a spike in yields and the yen and a decline of over 1% in the Nikkei. In Europe, the declines haven’t been as steep as GDP for the region declined 0.1% which was in line with forecasts, although Industrial Production in Germany unexpectedly declined.
Less than three months ago, the price of a gallon of gas in the US was pushing $3.90 and was up 21% on the year, and the price of crude oil was near $95 per barrel. Since then, crude oil prices have tumbled below $70 per barrel (as of yesterday’s close), and a gallon of gas is $3.20 which is down 17.5% from its peak and down slightly on the year. Next week’s CPI report on Tuesday and the subsequent FOMC report should be interesting.
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Dec 6, 2023
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“It is not heroes that make history, but history that makes heroes.” – Joseph Stalin
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures have caught a bid this morning following overnight strength in Asia and also in Europe this morning. The just-released ADP report didn’t do anything to alter that positive mood either, as the headline report came in modestly weaker than expected (103K vs 128K). Non-farm productivity and Unit Labor Costs are just hitting the tape as we type this. It looks like Productivity was higher than expected (5.2% vs 4.9% estimate) and the best since Q3 2020 while Unit Labor Costs fell more than expected (-1.2 vs -0.9%).
Outside of equities, mortgage applications were up for the fifth week in a row, gold is slightly higher, crude oil is slightly lower, bitcoin is above $44K, and Treasury yields have a positive bias with the largest moves at the shorter end of the curve.
After a two-day rally north of 4%, the Russell 2000 gave back about 1.4% on Tuesday but still managed to close above both its 50 and 200-day moving averages for the third day in a row – something we haven’t been able to say since early August.
Whenever a major equity index trades at ‘extreme’ overbought or oversold levels (two or more standard deviations above or below the 50-DMA), it tends to be a sign of overwhelming bullishness or bearishness in the market. These types of readings are mutually exclusive and rarely occur close to each other. The last six weeks for the Russell 2000 have been an exception to that norm. As shown in the trading range chart below, after closing at extreme oversold levels on 10/27, the Russell surged over the next five weeks and closed at extreme overbought levels last Friday (12/1). With just 24 trading days separating the most recent extreme oversold reading from the first extreme overbought reading, it was the quickest that the Russell shifted between the two ranges since June 2021.
In the Russell 2000’s history since 1978, there have only been 16 other times that it went from the oversold extreme to the overbought extreme in 30 trading days or less, and in today’s full post for subscribers, we provided an analysis of the index’s performance following these prior periods. Sign up for a two-week trial to Bespoke Premium to view the full report.
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Dec 5, 2023
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“Once, during Prohibition, I was forced to live for days on nothing but food and water.” – W.C. Fields
In case you missed it yesterday, here’s a clip to yesterday’s segment from CNBC Overtime which discussed the broadening of the market rally. CNBC Overtime – 12/4/23
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 looking like another weak start to the trading day following a weak overnight session in Asia after Moody’s lowered its outlook for China’s credit rating citing rising debt levels. Interest rates are lower as the 10-year yield is on the verge of breaking back down through 4.20%. Where it ends the day, though, will be dictated by the upcoming JOLTS and ISM Services reports at 10 AM.
90 years ago today, Utah ratified the 21st Amendment to the Constitution, and the US thereby achieved the three-fourths majority needed to officially repeal the 18th Amendment and end Prohibition on a national basis. While alcohol was technically illegal in the United States for the prior 13+ years, it was always part of the US culture and social scene, and its illegality only gave organized crime groups a wide open field to operate in. That ended with the 21st Amendment, although even with alcohol being legal on a national basis, several states maintained the Prohibition era through state temperance laws. Mississippi was a dry state for another 33 years before it finally ended Prohibition in 1966. We can only imagine what an Ole Miss tailgate would look like if Prohibition was still in place, but probably not this.
Regarding alcohol, we thought it would be a good time to check out how stocks in the sector have been faring lately. Overall, performance has been mixed. Molson Coors (TAP) has been the best performer this year, gaining more than 20%, but it’s down about 10% from its summer high. Along with TAP, other beer stocks have seen modest YTD gains this year. Even the embattled Anheuser-Bush (BUD) has seen a sharp rebound in the last month as the company’s Bud Light brand has been spending big on brand rehab inking deals with Ultimate Fighting (UFC) and NFL legends Peyton Manning and Emmitt Smith. While beer stocks have had a decent year, companies more involved in the spirits business, like Diageo (DEO) and Brown-Furman (BF/b) are both nursing hangovers.
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Dec 4, 2023
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“May the best of your today’s be the worst of your tomorrow’s” – Jay-Z
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 looking like a sluggish start to the first full week of trading for December as US equity futures are modestly lower, crude oil is lower, and bond yields are higher. The 10-year yield is up a little bit over 5 basis points (bps), but that’s only enough to take the yield back to 4.25%. The fact that crude oil prices are lower even as a US destroyer and several commercial ships came under fire in the Red Sea over the weekend shows just how heavy that market has become lately. In China, officials are advising people to refrain from large gatherings due to the reports of respiratory sickness around the country, so that’s something investors will be keeping an eye on going forward.
In a continuation of the stair-step rally that has been in place all year, bitcoin is adding another riser to the staircase as it rallies above $40K and to its highest level since April 2022.
On a y/y basis, bitcoin is now up over 140% which is impressive no matter how you look at it especially when you consider the fact that exactly a year ago, it was down over 70% on a y/y basis. Six months ago, in early June, the y/y change finally flipped back to positive levels and has remained that way ever since.
While a 140% y/y rally sounds extreme, from a longer-term perspective, bitcoin has seen some much more impressive y/y gains. Back in early 2021, bitcoin had rallied ten-fold over a trailing 12-month period, and in late 2017, the y/y change was over 2,000%. Granted, it was off a lower base, but it’s a massive move, nonetheless. What may sound even crazier, is that since the start of 2017, bitcoin’s average y/y change has been 180% or 40 percentage points more than the current y/y change.
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Dec 1, 2023
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“Any customer can have a car painted any color that he wants so long as it is black.” – Henry Ford
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
In its last earnings conference call, Tesla CEO Elon Musk noted that the rollout of the Cybertruck has been “production hell”. During yesterday’s rollout, the sentiment from that conference call was on display when the Tesla website said that the base model of the Cybertruck wouldn’t be available until 2025. Given the complexities involved in manufacturing the Cybertruck with, among other things, its stainless-steel exterior, it shouldn’t come as a surprise that it’s difficult to produce. Still, we found it ironic that the product launch came just one day short of 110 years after Henry Ford unveiled the first moving assembly line for cars and reducing the time it took to complete the build of an entire car from half a day to an hour and a half! And now on to the markets.
The year is now 92% complete, but a lot can happen in the final month. With a gain of 9.1% on a total return basis through the end of November, the S&P 500 had its best month since July 2022 and only its 15th monthly gain of over 9% since the start of 1980. With November’s gain, the S&P 500 is up 13.8% over the last year which is two percentage points better than the one-year average total return of 11.8% dating back to 1928. While the last year was above average, the last two years have been weak. The 1.7% annualized gain would be flat if it wasn’t for the dividends. It’s hard to believe but the S&P 500 closed yesterday just 0.80 points above where it closed exactly two years earlier! After factoring in inflation during that time, investors are staring at an annualized decline of about 5% over the last two years. While the two-year return has been well below the historical annualized average of 10.6%, returns for the last five and ten years have been modestly above average, while the 20-year annualized gain of 9.7% is 1.2 percentage points below the historical average.
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