This morning’s release of the NFIB‘s survey of small business sentiment showed only a modest rebound. Whereas the index was expected to rise from 89.8 up to 91, the index only rose to 90.3.  Albeit higher sequentially and off the lows from last fall, the January reading also remains below the worst levels from the onset of COVID.

In addition to optimism remaining weak, the most recent month also saw a surge in economic policy uncertainty.  Rising 5 points month over month to 76, that index is at the highest level since July 2021 and saw its biggest one month jump since last July.

Looking across the individual components of the report, breadth was mixed with six of the ten inputs into the headline optimism number moving higher while the other four fell.  Multiple categories—in addition to the headline index—are in the bottom decile of their historical ranges.  As we discussed in today’s Morning Lineup, while in aggregate some aspects of the report remain weak, there is some nuance. In general, this month’s report saw improvement in categories measuring realized changes (i.e. actual earnings changes, actual sales changes, actual employment changes, etc.) while expectations were much worse (i.e. plans to make capital outlays, plans to increase inventories, etc.). In other words, small businesses appear to have pessimistic outlooks contrary to reporting actual improvements in their businesses.

The employment situation showcases that divergence between actual changes and plans. Hiring plans remain at the low end of the pandemic range even after a slight rebound versus the December reading. Meanwhile, compensation plans have plummeted to a new low and the weakest level since April 2021. That was in spite of actual employment changes showing net hirings at the highest level since March 2020 with a coincident uptick in compensation to the highest level in six months.

Albeit on net more firms are seeing declines rather than increases, this month also saw an improvement in actual sales and earnings. Part of that change is likely thanks to alleviation in inflation as the higher prices index hit a new post-high low of 42. In turn, the percentage of respondents reporting now as a good time to expand has modestly recovered.  With that said, sales expectations continued to reverse lower after peaking two months ago.

As for expenditure indices, again the dichotomy of plans and actual changes is apparent.  While plans experienced a 13th percentile month over month decline to the low end of its pandemic range, reported capital expenditures have surged with a top decile month over month reading. In fact, that sharp rise during the month of January resulted in the joint highest reading of the post pandemic period (March and May 2021 saw identical readings).

Meanwhile, plans to increase inventories are rapidly declining.  The index for inventory accumulation has now reached the lowest level since 2009.  However, even though inventories are rapidly declining, businesses on net report satisfaction with current inventory levels. Following the very high readings in inventory satisfaction earlier in the pandemic (meaning on net a higher percentage of respondents reported inventories were too low), the huge drop in inventory accumulation would indicate some supply/demand mismatches are working themselves out; likely in part thanks to weakening sales.

Turning back to capital expenditures, the NFIB also surveys on what these small businesses are spending their money on.  January saw a broad uptick across categories with the exception of furniture or fixtures.    Click here to learn more about Bespoke’s premium stock market research service.

The monthly survey of consumer expectations from the New York Federal Reserve was released this morning and showed that ahead of January’s CPI report on Tuesday, consumer expectations towards inflation are generally stable and trending lower. On a one-year basis, inflation expectations dropped ever so marginally falling from 4.99% down to 4.95%.  Three-year inflation expectations dropped from 2.99% down to 2.71%, and the only increase was in five-year expectations which increased from 2.4% to 2.5%.

Regarding expectations for the next five years, it’s hard to read too much into the trend since the NY Fed has only been surveying consumers on this time frame for a year.  For the one and three-year time frames, however, we have close to 10 years worth of monthly responses so we can get a better read on how things stand now versus the past. Starting with expectations for the next year, consumers expect inflation to continue to trend lower from the peak of 6.78% last June, and at the current level of 4.95%, they’re at the lowest level since July 2021 even as they remain well above the historical average of 3.34%.

Inflation expectations for the next three years are more interesting. While expectations peaked at 4.21% in October 2021, January’s reading came in at 2.71%, which was the lowest since October 2020, but more importantly, below the historical average of 2.99%.  In other words, consumers expect less inflation over the next three years than they have across the majority of other times in the last ten years.   See more analysis of economic data with a Bespoke Premium membership.  Click here to sign up for a two-week trial today.

20% of stocks in the large-cap Russell 1,000 have made 52-week highs at some point so far in 2023.  However, about 23% of stocks in the index made their last 52-week highs in February 2022.  Across the entire index, the average stock made its last 52-week high 156.9 days ago.  Real Estate stocks made their 52-week highs an average of 202.2 days ago, the furthest back of any sector, while Energy stocks on average made their 52-week highs 106.9 days ago (the most recent of any sector).

Below is a list of Russell 1,000 stocks with market caps above $50 billion that have made new 52-week highs at some point in 2023.  Of the 28 stocks that made the list, there’s representation from eight of eleven sectors.  That’s pretty spread out.  The only sectors that aren’t represented are Materials, Real Estate, and Utilities.  Health Care, Industrials, and Technology each have six stocks that made the list.  The largest stocks include names like Exxon Mobil (XOM), Eli Lilly (LLY), Merck (MRK), Mastercard (MA), Oracle (ORCL), and Visa (V).    You can monitor the daily list of new 52-week highs in our Tools section with a new Bespoke Premium membership.  Click here to sign up for a two-week trial today.

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.

While you’re here, join Bespoke Premium with a 30-day trial!

Frauds

The Great Gatsby of Gold Took Their Millions—and Vanished by Emily Shugerman (The Daily Beast)

An investment manager who promised investors that he would shepherd their savings via physical precious metals certificates ended up absconding with millions in client assets. [Link]

Commodity Trader Trafigura Faces $577 Million Loss After Uncovering Nickel Fraud by Archie Hunter and Jack Farchy (Bloomberg)

One of the world’s largest metals traders may have bought bogus nickel by the hundreds of millions. The metal is a favorite for fraudsters because of relatively high value-weight ratios but less scrutiny and security than precious metals. [Link; soft paywall, auto-playing video]

‘Sam? Are you there?!’ The bizarre and brutal final hours of FTX by Joshua Olver (FT)

A detailed look at leadership of the crypto trading giant as its entire business model evaporated over the course of a couple days last fall, leading to frantic calls trying to borrow billions in order to meet client redemptions. [Link; paywall]

Platform Demise

Elon Musk fires a top Twitter engineer over his declining view count by Zoë Schiffer and Casey Newton (Platformer)

When engineers tried to explain to the irate CEO of Twitter that people might be losing interest in his whole narrative (as opposed to his own tweets’ reach being suppressed by the company’s algorithm) one was fired. There are now only two principal engineers left at the company. [Link]

Tiktok’s enshittification by Cory Doctorow (Pluralistic)

As platforms grow, they stop optimizing for users and start optimizing for advertisers and other paying customers, creating negative feedback loops of bad experiences which eventually doom the audiences advertisers are trying to access. [Link]

Big Mistakes

‘As bad as it gets without body bags.’ by James Fallows (Breaking The News)

Some background on a harrowing incident at Austin’s airport which would likely have led to a disastrous mid-air collision if not for some quick thinking by a very attentive FedEx flight crew. [Link]

Your jailbroken ChatGPT might violate OpenAI’s safety guidelines when role-playing as ‘DAN’ by Clint Rainey (Fast Company)

OpenAI has built guardrails into its popular ChatGPT chatbot, but a set of instructions posted on Reddit appear to show how to get around the restraints that have been placed on the AI system by its creators. [Link]

Government Chaos

A single Republican holdout doomed the GOP’s ‘skinny budget’ on Monday by Jerod Macdonald-Evoy (AZ Mirror)

A single Republican state House legislator in Arizona is preventing the passage of a budget until the 2022 election can be re-done as she claims that the election was rigged. With a one vote majority, that means the state is faced with a difficult path to keeping government operating. [Link]

Moldova’s Pro-Western Government Collapses as Fallout From Ukraine War Worsens by James Hookway (WSJ)

The small neighbor to Ukraine, which has also been put under pressure by Russia, saw its pro-EU government resign this week after a brutal series of economic shocks related to the war in Ukraine. [Link; paywall]

Fungus

Fungal infections are becoming more common. Why isn’t there a vaccine? by Berkeley Lovelace Jr (CNBC)

While fungal infections are less of a threat than bacteria or viruses, a warmer planet is making them more common with some fungal infections untreatable. But no vaccine currently exists. [Link]

Texas

How the Crispy Dog Became San Antonio’s Signature Snack by José R. Ralat (Texas Monthly)

A cheese-stuffed dog fried in a tortilla shell is a famed snack for San Antonians, but the demise of small family restaurants that popularized the treat is making it harder to find in the city. [Link]

Investing

The Retreat of the Amateur Investors by Gunjan Banerji (WSJ)

First-time investors went from near-overnight millionaires thanks to free-to-trade apps and lots of leverage to working in delis after a year-long bear market that hit momentum and growth plays especially hard. [Link; paywall]

Real Estate

Boomer Dads Are Driving Real-Estate Agents Nuts by Adriane Quinlan (Curbed)

Millennials are relying on their parents for advice buying homes as well as funding, which has Boomer Dads more involved in real estate transactions than has historically been the case. Realtors, at least, are not fans of this arrangement. [Link]

Superbowl

Patrick Mahomes Is the NFL’s Half-Billion Dollar Quarterback. He’s Still a Bargain. by Andrew Beaton (WSJ)

While a half-billion dollar contract may sound impossible to live up to, the Kansas City Chiefs’ Patrick Mahomes has turned out to be worth much more than the Chiefs pay him. [Link; paywall]

Read Bespoke’s most actionable market research by joining Bespoke Premium today!  Get started here.

Have a great weekend!