$10,000 in Gold (GLD)
In today’s “$10,000 in…” series, we’re taking a look at the gold ETF (GLD). The SPDR Gold Trust (GLD) began trading nearly 20 years ago in November 2004. It marked the first time that investors could easily allocate funds to gold in a brokerage account.
When GLD began trading on 11/18/2004, it had total assets of just under $600 million after its first day of trading. By the end of 2004, AUM had more than doubled up to more than $1.3 billion.
Today, GLD has more than $68 billion in AUM. At its last quarterly filing, it held more than 26 million ounces of physical gold valued at more than $62 billion.
So what would a hypothetical $10,000 investment in the GLD ETF on its release date in November 2004 be worth today? As shown below, $10,000 would now be worth roughly $52,000. That’s an annualized return of about 8.73%. Not bad for a piece of metal, right?
How does that $10k investment in GLD when it began trading nearly 20 years ago compare to something like the stock market? If we use the S&P 500 ETF (SPY) as a proxy for US large-cap stocks, a $10,000 investment in SPY on the same day that GLD began trading back in November 2004 with dividends re-invested would be worth about $68,725 today. That’s an annualized return of roughly 10.2%, or about 1.5 percentage points better than GLD annually. You can see how both GLD and SPY got to their current levels in the chart below.
As always, past performance is no guarantee of future results!
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Bespoke’s MORTGAS Misery Index
Last year when mortgage rates and gas prices were rising steadily day in and day out to multi-decade highs, we created our MORTGAS Misery Index that is simply the sum of the 30-year fixed mortgage rate and the cost of a gallon of gas.
Below is an updated look at both gas prices and mortgage rates.
The national average 30-year fixed mortgage rate according to Bankrate.com is currently down to 6.86%, which is the lowest level seen since seen May 11th, 2023. As shown below, the peak for mortgage rates during the current cycle was 8.09% on October 25th, 2023.
Longer term, of course, mortgage rates remain very elevated. They would need to fall another 40 basis points down to 6.45% to get back to the peak readings seen in the mid-2000s prior to the Financial Crisis.
Gas prices have also been falling steadily since peaking in the spring (which is usually the case from a seasonal perspective). Using AAA’s national average for a gallon of regular unleaded, gas prices are currently at $3.387/gallon. That’s down about 30 cents from the peak price seen so far in 2024 of $3.679 on April 18th. Prices are down about 50 cents from their September 2023 peak of $3.88/gallon.
Longer-term, gas prices are currently about 50 cents above the 20-year average of $2.89/gallon. The low-point of the current decade came on April 28th, 2020 when the national average hit $1.768/gallon. The high point came on June 13th, 2022 when prices ticked just above $5/gallon ($5.016).
Combined, our MORTGAS Index currently sits at 10.2. As shown below, the index is down 1.46 points from its record high of 11.66 seen in late 2023, but it’s still extremely elevated relative to the last 20 years. Looking on the bright side, the index is now back below its peak seen in 2008 during the Financial Crisis, but we’re going to need to see significant further easing to get back to the 20-year average of 7.62. A drop like that would likely mean mortgage rates falling at least into the 4-5% range and gas prices remaining closer to a 2-handle than a 4-handle.
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Bespoke’s Morning Lineup – Divergent Sectors
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“Common sense is very uncommon.” – Horace Greeley
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 was a positive tone heading into weekly jobless claims, and futures have remained higher following an inline report. Initial claims were in line with forecasts at 232K while continuing claims were slightly lower than expected (1.863 mln vs 1.870 mln). In Europe this morning, equities are also trading higher following a stronger-than-expected composite PMI report which was goosed mainly by the Paris Olympics.
Outside of Energy (XLE), large-cap sectors have performed admirably over the last five trading days. Of the eleven sector ETFs shown below, only Energy has declined and Real Estate (XLRE) is the only other sector failing to rally more than 1%. At the top of the list are Consumer Discretionary (XLY) and Technology (XLK) which have both rallied nearly 5% or more. Behind those two leaders, four other sectors have rallied more than 2% while three sectors have gained more than 1%. Ten out of eleven sectors are above their 50-day moving averages with six in overbought territory (1+ standard deviations above their 50-DMA) and another two sectors – Consumer Staples (XLP) and Health Care (XLV)– trading in extreme overbought territory (2+ standard deviations above 50-DMA).
From the highs in late March through now, the S&P 500 has experienced a V-formation where the magnitude and speed of the bounce was a mirror image of the decline, and the charts of both Consumer Discretionary (XLY) and Technology (XLK) illustrate that pattern.
While Consumer Discretionary (XLY) and Technology (XLK) have followed the pattern of the broader market, most other sectors have followed their own unique paths. Energy (XLE), for example, has missed out on most of the rally, remaining well off of its late July highs.
At the other end of the spectrum, if you look at the charts of the Consumer Staples (XLP) and Utilities (XLU) you would never even know that there was a decline in the first place. In the years coming out of the Financial Crisis right up until Covid, investors became used to sectors moving closer in unison to each other, but as the last several weeks have illustrated, it’s not always a tide that lifts and sinks all boats.
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Bespoke’s Morning Lineup – Target Hits the Bullseye
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“He who moulds public sentiment goes deeper than he who enacts statutes or pronounces decisions.” – Abraham Lincoln
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Between the 10%+ rally in shares of TGT and last week’s 6%+ rally in Walmart (WMT) in reaction to its earnings report, it’s hard to get too concerned about the health of the US consumer. Yes, these are more anecdotal observations than quantitative, but they’re also two of the largest retailers in the country,
Let’s start with TGT. The chart below shows TGT’s historical performance on its earnings reaction days since 2002. With the stock trading up over 10% in the pre-market, today would be the third time in the last four quarters that the stock had a double-digit positive reaction to earnings. Since 2002, there have only been seven times when the stock had an earnings day reaction of more than 10%.
Regarding TGT’s stock performance, it had been ‘on sale’ for months heading into this morning’s report, but based on where the stock surged to in the pre-market, the downtrend from the spring high has been broken.
Looking back to WMT’s report last week, the stock’s 6%+ rally was the first time in at least 20 years that it experienced back-to-back earnings reaction day rallies of over 5%, and those two one-day rallies were the fourth and fifth best earnings reaction day performances since at least 2002.
Unlike TGT, which had been under pressure heading into today’s report, WMT’s chart has been more of a one-way move to new all-time highs. WMT’s strength could be construed as a sign that consumers are trading down due to a tough economic environment, but the company made no such comments in its conference call last week. CEO Doug McMillon flat-out rejected that idea when he said “So far, we aren’t experiencing a weaker consumer overall.” CFO John David Rainey reiterated that point when he said, “Each of the months of the second quarter were relatively consistent… Even in the first couple weeks of August here, things have been remarkably consistent.”
Turning to retail stocks in general, it’s been a rangebound summer for the sector. The chart below shows the performance of the SPDR S&P Retail ETF (XRT) which tracks the performance of retailers on an equal-weighted basis. After a strong rally of over 30% off last fall’s lows, the ETT stalled out just under $80 before the broader market corrected in the spring. Since then, XRT has made four additional attempts at breaking through the $80 level but has been stymied each time. TGT’s rally this morning will provide a boost to the sector, but it’s going to take more than that to get it over the hump.
On a longer-term basis, that $80 level in XRT represents an important level, and if and when it can finally break through that resistance, a run to the post-COVID stimulus-fueled highs would be the next level to watch for.
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Country Small-Cap ETFs
Small-caps in the US have been extreme laggards compared to large-caps over the last couple of years, but what about small-caps in other countries? Below is a look at the price change (%) of seven small-cap country ETFs since February 2012 (the first point in which all seven were available).
The Russell 2,000 small-cap US ETF (IWM) is up 159.9% over these 12+ years, and only India small-caps (SMIN) have done better with a gain of 222.8%. India small-caps only recently took the lead on the US with a big jump higher over the last 18 months or so.
Small-caps in other countries have been poor options for US investors relative to owning something like the S&P 500 ETF (SPY). The Europe small-cap (IEUS) and Japan small-cap (SCJ) ETFs are up 68.2% and 63.9%, respectively, since February 2012, while the UK small-cap ETF (EWUS) is up 38.8%.
Small-cap ETFs for China (ECNS) and Brazil (EWZS) are flat-out negative over this extended 12+ year time frame with China down 41% and Brazil down 50%.
If you’ve been lamenting the lagging performance of US small-caps, it could have been worse!
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Bespoke’s Morning Lineup – 8/20/24 – 1,2,3,4,5,6,7,8…
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“Capitalism does live by crises and booms, just as a human being lives by inhaling and exhaling.” – Leon Trotsky
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There’s no data on the economic calendar today, and there wasn’t a lot in the way of earnings reports overnight or this morning, and that has resulted in a relatively quiet (but slightly positive) tone in equity futures. Likewise, crude oil and treasury yields have seen little movement. The most exciting area of financial markets this morning could be in the gold and crypto markets where bullion is well over $2,500 per ounce and bitcoin is trading back above $60K.
Overnight in Asia, equity indices were all over the place with Japan up nearly 2% and China down about 1%. In China, the PBoC left 1 and 5-year prime rates unchanged. European stocks have seen little movement as the STOXX 600 is little changed as July CPI came in unchanged on a m/m basis which was right in line with forecasts. On the interest rate picture, ECB member Olli Rehn was on the wires saying that risks to the growth outlook have raised the odds of a rate cut in September.
Both the S&P 500 and Nasdaq composite have finished the day higher for eight straight days now, and if the current level of the futures holds, the streak for both indices will extend to a 9th straight day today. Since its inception in 1971, the Nasdaq composite has now had 89 different streaks of eight or more daily gains in a row which works out to about three streaks every two years. For the S&P 500, these streaks have been much less common with just 30 since 1971 or about one every two years. Concurrent streaks of eight or more days in a row have been even less common with just 15 since 1971, or about one every four years.
The charts of the S&P 500 and the Nasdaq below (both on a log scale) show where every concurrent streak of eight or more days of gains occurred, and while the average works out to about one every four years, they haven’t been evenly distributed. The current streak is the second in less than a year and the third in less than three years. Before that, the prior two were about four years apart (2017 and then 2013), but before the 2013 streak, there were more than 21 years without a single occurrence and that included the late 1990s dot-com bubble- a period that people look back on as thinking the market did nothing but go up! In last night’s Closer report, we included an analysis of the performance of both indices following those prior streaks, and performance was mixed with forward returns that were generally weaker than the average forward returns for all periods since 1971.
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Yen Stalls After Historic Rally
While the moves in US equities in recent weeks have been extreme, the currency markets have been even crazier, especially in the Japanese yen. In early July, the yen was trading at its weakest levels in over 30 years (higher values in the chart below), and shorting the yen was ‘easy money”. Those rumors of the yen’s death proved to be exaggerated. Just like that, the decline in the yen stalled out, unleashing a stampede of shorts looking to cover causing one of the most extreme movements in the currency ever recorded. From its weakest point in early July to early August, the yen rallied a practically unheard-of 10%+. While the rally stalled in the short term, the USD/JPY cross remains down nearly 10% from its peak in early July.
To illustrate the gravity of this move, the chart below shows the rolling five-week (25-trading day) change in the USDJPY cross going back to the early 1970s. The current move ranks as the most extreme since the Financial Crisis and before that the Russian Debt default in 1998. While the recent chaos in the currency markets reverberated throughout financial markets, including equities, so far at least, the impact this time around has been downright tame relative to the two most recent periods of similar volatility.
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Alphabet (GOOGL) Turns Twenty
Twenty years ago to the day, the company running the world’s largest search engine went public. On August 19th, 2004, Alphabet (GOOGL) shares IPO’d at a split-adjusted price of $2.13. In the 20 years since, the stock has been a top performer in many aspects. Simply looking at the top line, revenues have exploded from $512 million in Q4 2003 to $84.7 billion in the latest quarter. Given its rise to become one of the six “trillion dollar market cap” companies, the stock has ripped higher an astounding 7,669% from its IPO price.
So how has Alphabet done in the 20 years since it went public versus other big winners in the stock market? Below is a look at the 30 stocks currently in the S&P 500 that are up the most over the last 20 years. As shown, these 30 names are all up more than 3,000% since GOOGL’s IPO, and GOOGL ranks as the 11th best. Unsurprisingly, the single best stock by a huge margin is NVIDIA (NVDA) with a gaudy 127,418% gain, but other mega-caps like Apple (AAPL) and Amazon (AMZN) have both put up better numbers than GOOGL as well. Additional names that have done better than GOOGL include Netflix (NFLX) with a 30,000%+ gain, Monster Beverage (MNST), Booking Holdings (BKNG), Intuitive Surgical (ISRG), Regeneron (REGN), Deckers Outdoor (DECK), and Salesforce (CRM).
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Bespoke’s Morning Lineup – 8/19/24 – Lucky Sevens
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“We’re using modern technology to revert to primitive kinds of human relations.” – Bill Clinton
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It’s late August, so it shouldn’t come as a surprise that the market tone is quiet to start the week, especially with earnings season winding down. The only report on the calendar this morning is leading Indicators at 10 AM, and for the rest of the week, the only other notable reports are initial claims (Thursday), new (Friday) and existing (Thursday) home sales, and flash PMI readings (Thursday) from S&P being the only other reports to look forward to. Besides these data points, though, the market will also be focused on Wednesday’s Fed Minutes, benchmark revisions to Non-Farm Payrolls, and Fed Chair Powell’s speech from Jackson Hole on Friday.
Overnight in Asia, Japan was down over 2% as the yen strengthened, and in Europe, the STOXX 600 is looking at modest gains of around 0.3%.
The week looks to be getting off to a quiet start, but if the S&P 500 can finish higher today it will stretch the current streak of daily gains to eight. That would be the longest winning streak since last November and tied with six other periods for the longest winning streak since 2009. At seven days now through last Friday, the current streak ranks as the 16th streak of seven or more days, and each of those streaks is indicated with red dots in the chart below. Four of the prior 7-day streaks occurred in 2013, another three were in 2017, and another five were clustered during the post-Covid bull market.
In today’s Morning Lineup, we looked at how the S&P 500 performed in the week and month following seven-day winning streaks since the Financial Crisis. To see the results of that analysis, sign up for a trial today.
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Brunch Reads – 8/18/24
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read 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.
The Right to Vote: It’s an election year, and on this day in 1920, the 19th Amendment was ratified, granting American women the right to vote. The vote hinged on a single vote where 24-year-old Harry Burn, a member of the House of Representatives from Tennessee, had initially opposed but changed his vote after receiving a letter from his mother urging him to support suffrage. It was a monumental victory for the women’s suffrage movement led by figures like Susan B. Anthony and Elizabeth Cady Stanton. Also, it set the stage for the continued advancement of women’s rights in the US.
Here’s how people are actually using AI (MIT Technology Review)
AI is all around us now, whether we like it or not, and many of us are using it for different purposes and in different ways. Productivity may have been the name of the game to begin with, but the use of the new technology has gotten much more personal for many people. Meta Platforms CEO Mark Zuckerberg has been bullish on AI agents and assistants for quite some time now but maybe we’re already taking it a step further in using AI for companionship. The anticipated “killer apps” have yet to emerge, and its limitations leave plenty of room for error, so it’s still difficult to bet on the shape, or shapes, AI will solidify itself. [Link]
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