Bespoke’s Morning Lineup – 12/23/24 – The Nightmare Before Christmas
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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.
Brunch Reads – 12/22/24
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
“Shoe Bomber” Richard Reid’s Terror Plot Thwarted: Richard Reid, known as the “Shoe Bomber,” is a British national who attempted to destroy American Airlines Flight 63 from Paris to Miami on December 22, 2001. Reid had explosives concealed in the soles of his shoes, planning to ignite them during the flight. However, his attempt was thwarted when passengers and crew noticed his behavior and the smell of smoke on the aircraft. They managed to subdue him before he could successfully detonate the explosives. The flight was diverted to Boston’s Logan International Airport, where Reid was arrested. He later pled guilty to terrorism-related charges and was sentenced to life in prison without parole. In the 23 years that have passed since, how many pairs of shoes do you think have been removed at TSA checkpoints around the world.
Sports
‘Oh, s—, here come all the billionaires’: How SMU came back from the dead (ESPN)
SMU, once a powerhouse in college football, fell from grace in the 1980s and received the ‘death penalty’ getting shut down for two seasons due to NCAA violations. In recent years, SMU has experienced a remarkable resurgence, fueled by wealthy boosters and a renewed commitment to success. The influx of NIL funds and the backing of deep-pocketed donors, coupled with joining the ACC, have allowed SMU to compete financially and athletically at a higher level. The university’s leadership, including the board of directors and the coaching staff, has been instrumental in driving the program’s revival. [Link]
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Annual Outlook — 2025 Pros and Cons
Our Bespoke Report – 2025 Pros and Cons is now available for Bespoke subscribers. This report covers everything you need to know about the set-up for financial markets and the economy heading into 2025. If there’s ever a “must-read” Bespoke report, this is it!
- Another year is in the books! In early December, we discussed how the market had every reason to rally given the macro backdrop. The market was broadening, the economy was strong, earnings growth was positive, the Fed was our friend, and seasonality was in the market’s favor. November’s election results only added more fuel to the fire as the incoming administration wants a much lighter regulatory touch.
- The backdrop was positive, but the question was how much could the market keep rallying on the same news. As the month has progressed, investors have started asking that question, and the honeymoon for all that could go right turned to a reality check. The difficulty in passing a funding bill as we write this highlights the fact that the Republican party has several factions that aren’t always in agreement, and with such a slim majority, getting things accomplished may not be as easy as originally thought.
- Besides politics, the broadening that started in the summer saw a sharp reversal in December as the S&P 500 had a record streak of negative daily breadth readings. Fed Chair Powell also reminded markets that while the Fed may not be a bull’s enemy, if you want a friend, get a dog. From a seasonality perspective, as the year winds down, the market is still in the middle of its strongest six-month period of the year, but the seasonal tailwinds aren’t as steady as they have been.
- None of these issues are insurmountable, but they serve as a reminder to keep investors honest.
- To help lay the groundwork for the year ahead, we’ve published our 2025 Pros and Cons report.
You can read our 2025 Pros and Cons by signing up for our 2025 All Access Special that gets you the first two months of Bespoke Institutional access for just $20, or start a two-week trial to our Bespoke Premium plan. You can review our membership plans here to help make your decision.
Bespoke’s Morning Lineup – 12/20/24 – December of Discontent
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“It’s so much darker when a light goes out than it would have been if it had never shone.” – John Steinbeck, The Winter of Our Discontent
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 doesn’t officially start until tomorrow, but already it has been a December of discontent for bulls as breadth has been negative for a record 14 straight trading days and looks likely to extend that streak to 15. This kind of consistent broad weakness is unprecedented, and it’s reflected in the performance of the eleven sector ETFs and where they’re trading relative to their short-term trading ranges. Every one of them is down at least 2% in the last five trading days, and three have dropped at least 6%. Just two sectors headed into today above their 50-day moving averages, and seven have dropped into oversold territory, including six in ‘extreme’ oversold territory (more than two standard deviations below their 50-DMAs).
Bespoke Stat Sheet — 2024
We’ve put together a slide deck featuring some of our favorite stats published throughout the year. In this report we provide a month-by-month review of some of the most important and interesting market stats as they happened in real time, in bullet point format. Enjoy!
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The Closer – FDX and NKE, Leading Index Streak, Existing Home Sales – 12/19/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a recap of FedEx (FDX) and Nike (NKE) earnings (page 1) followed by a rundown of the latest leading index and 5 Fed data (page 2). We also check in on existing home sales (page 3) before closing out with a recap of today’s horrendous 5 year TIPS reopening (page 4).
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Bespoke’s Morning Lineup — 12/19/24
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.
“Being very early and being wrong look exactly the same 99% of the time.” – Seth Klarman
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
As shown below, the S&P 500 was sitting slightly in overbought territory heading into the trading day yesterday, but it finished below its 50-day moving average.
An already oversold 10-day advance/decline (A/D) line for the S&P got even more oversold yesterday with just 19 stocks in the index up on the day versus 483 that were down. Yesterday’s negative breadth extended the streak of days with more decliners than advancers to 13 straight; a record losing streak since 1990.
As shown below, the 10-day A/D line is now the most oversold it’s been since the bear market lows in October 2022.
The Closer – A Horrible Fed Day, Equal Weight, Construction – 12/18/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a dive into the FOMC including the changes to forecasts (pages 1 and 2) and the huge drop in equities in response (page 3). We also check in on the performance of equal weight stocks and the dollar (page 4). We then switch to a recap of today’s residential construction figures (page 5) and the latest EIA data (page 6).
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Fixed Income Weekly — 12/18/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
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Bespoke’s Morning Lineup – 12/18/24 – Dow Looks to Avoid 10 In a Row
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.
“All great and honorable actions are accompanied with great difficulties, and both must be enterprised and overcome with answerable courage.” – William Bradford
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 view yesterday’s CNBC segment previewing the Fed decision today, click on the image below.
There’s a positive tone in futures this morning, but what makes today slightly different from the last two weeks is that the Dow futures are slightly outperforming on the session, and the equal weighted S&P 500 is up slightly more than the cap-weighted index. Could this be the long-awaited day of positive breadth where the Dow avoids a 10-day losing streak? There’s still a long way to go between now and the closing bell, and in between, we still have a Fed decision to get through.
After today’s FOMC decision, we’ll also get important policy announcements from the BoJ on Thursday and PBoC on Friday. Ahead of these meetings from the two largest central banks in Asia, equities in the region were mixed with Japan down 0.7% and China up by a similar magnitude. In Europe, trading has taken on a more broadly positive, although muted, tone. The STOXX 600 is up 0.2% after headline CPI for the Euro region fell 0.3% which was right in line with expectations, and Core CPI fell 0.6% which was also right in line with estimates.
Back here in the US, the only economic reports on the calendar are Building Permits and Housing Starts. Both indicators have been weak in recent months partly due to the hurricanes in the southeast. While economists were expecting a rebound, the results relative to expectations were mixed as Building Permits came in significantly better than expected while Housing Starts missed by over 100K. Much of that weakness was a result of weakness in multifamily units.
Speaking of housing, the homebuilder ETF (XHB) looks a lot like many other charts out there as there has been a consistent pattern of selling ever since December started. In the case of XHB, the selling started a little earlier on the Monday before Thanksgiving. Since then, if the market has been open for trading investors have been selling homebuilder stocks. If there’s any consolation to the recent weakness, it’s that XHB has remained above its 50-DMA, and the weakness has been on light volume. Since its high on 11/25, daily volume in XHB has been 39% less than it was in the prior eleven months.
As shown in the chart above, there has been a consistent trend of red bars in the chart of XHB over the last 15 trading days. In the entire history of the ETF, there has never been a longer streak where the ETF closed the session lower than it opened. If you think your kids can be persistent in asking for a specific holiday gift, they have nothing on the relentless selling in the homebuilders.
