The Bespoke Report — Equity Market Pros and Cons — Q2 2024
This week’s Bespoke Report is an updated version of our “Pros and Cons” edition for Q2 2024.
With this report, you’re able to get a complete picture of the bull and bear case for US stocks right now. It’s heavy on graphics and light on text, but we let the charts and tables do the talking!
On page three of the report, you’ll see a full list of the pros and cons that we lay out. Slides for each topic are then provided on page four and beyond.
To read this report and access everything else Bespoke’s research platform has to offer, sign up for Bespoke’s 50/20 special today. Our 50/20 special gets you a full year of Premium for half off, then 20% off per month after the first year. SIGN UP HERE.
All Good Things Come to an End
The rally from the October lows through the end of March was enough to make any bull giddy, but April has brought a decidedly different market mood. Stocks have hit the pause button, and in many cases the rewind button. While the S&P 500 was comfortably above its 50-day moving average (DMA) from early November through the end of March, it has been creeping towards that level all April, and as of Friday afternoon, it even dipped slightly below.
If the S&P 500 closes around these levels this afternoon, it will snap a streak of 109 trading days of closing above its 50-DMA. This streak, though impressive, wasn’t record-breaking, but since 1953, only ten were longer, with the last exceeding it coming in 2011. (See chart below for historical context)
The chart below shows where each sector, the S&P 500, Nasdaq, and Russell 2000 are trading relative to their 50-DMAs now versus where they were trading on 3/28 when the S&P 500 last closed at a record high. Not surprisingly, every sector and index is less extended now. Nearly half of the eleven sectors have also broken below their 50 DMAs, while three others (Industrials, Materials, and Technology) are precariously close. While corrections, or what in this case has merely been a pullback, can be unsettling, they are a natural part of any market, even a bull market, environment.
Bespoke’s Morning Lineup – 4/12/24 – Not So “Golden”
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.
“The difference between fiction and reality? Fiction has to make sense.” – Tom Clancy
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Another earnings season has arrived as the big banks kicked off the reporting period this morning, and the results have been stronger across the board. All six companies reporting beat expectations on both the top and bottom lines. While JP Morgan (JPM) is down nearly 3% and Wells Fargo is down fractionally, the other four stocks are all up by at least 1%.
Despite what have been positive results, futures are lower this morning as the market digests yesterday’s gains and headlines that Israel is gearing up for an imminent direct strike from Iran. That would have major implications in the energy space, but there have been similar Friday headlines in recent weeks that never amounted to anything.
As for the economic calendar, Import Prices were just released, and they increased by 0.4% m/m which was higher than the 0.3% forecast. Ex petroleum, though, they were unchanged which was less than the 0.1% forecast. The only other report on the calendar for the week is Michigan Confidence, and the specific area of focus will be inflation expectations. For the next year, economists are expecting one-year expectations to remain unchanged at 2.9%.
Gold prices have continued their blistering rally this morning, notching their eighth consecutive daily gain in the past ten days. The yellow metal has surged 17% since the start of March, pushing it more than 20% above its 200-day moving average (DMA) and 12% above its 50-DMA. Both spreads rank in the top 3% historically, a clear signal of gold’s recent strength.
This surge in gold has fueled a similar rally in gold mining stocks. The NYSE Arca Gold Miners Index (GDX) has spiked 30% since late February, even outpacing gold itself. However, unlike the commodity, the miners remain in negative territory year-over-year. That being said, the GDX did experience a bullish “golden cross” yesterday, where the 50-DMA crossed above the rising 200-DMA. While technicians often view these patterns as a positive sign, they have a mixed historical record.
In the case of the GDX, not only have golden crosses had a mixed historical record, they’ve been more of a bearish indicator than anything else. Since the inception of the index back in 1994, there have been 13 prior golden crosses, and in the table below we summarize the median performance of the index following each one along with the frequency of positive returns. While the GDX’s median performance over the following week was a gain of 1.7% which is well above the average 0.2% gain for all periods since 1994, median performance over the following one, three, six, and twelve months was not only weaker than the average for all periods, it was flat out negative! One year later, for example, the GDX’s median performance was a decline of 12.3% with positive returns less than 40% of the time.
Read today’s entire Morning Lineup.
For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
The Bespoke 50 Growth Stocks — 4/11/24
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. There were 7 changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. With Bespoke Premium, you’ll receive a number of daily market updates from us along with our weekly newsletter and a portion of our investor tools. With Bespoke Institutional, you’ll receive everything that’s included with Premium plus additional daily macro analysis and more stock-specific research.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated monthly on Thursdays unless otherwise noted. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning after publication. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bespoke’s Morning Lineup – 4/11/24 – Stamp Inflation
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.
“The road to Easy Street goes through the sewer.” – John Madden
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 were higher heading into yesterday’s CPI report and reversed sharply lower once the data was released. This morning, we have the opposite backdrop ahead of the March PPI report. While the report is unlikely to be as big of a market mover as the CPI report, the results didn’t show as much inflation pressure in the producer sector and jobless claims were pretty much right in line with expectations. The ECB just announced its latest rate decision (no change, “inflation continues to fall”) which we break down in this morning’s report, and we’ll get further color during the press conference at 8:45 Eastern. Overall, futures have rallied a bit on the news as Nasdaq futures moved into positive territory while the S&P 500 is indicated to open just marginally lower. We’ll take it!
Yesterday’s CPI report was a disappointment on all fronts, and while the rate of inflation has slowed, it’s still firmly in positive territory which helps explain why consumers are so miserable. When you consider the cumulative impact of these price increases since the lockdowns in March 2020, it adds up. March’s CPI report reached an inauspicious milestone as it was the first time since March 1991 that the four-year rate of change in headline CPI exceeded 20%. We’re still nowhere near the levels from the 1970s and early 1980s, but 33 years is a long time.
If you show the chart above to any consumer and tell them that the cost of living has increased by 20% in the last four years, they’ll probably ask where you’ve been living the last four years and want to know if there’s any room to move in. What we have all experienced seems much larger. Take a bag of Doritos, a subject we have quite an expertise on. In 2019, a 9.75-ounce bag had a suggested retail price of $4.29, but today it costs about $1.50 more and is half an ounce smaller. Ignoring the change in size, that’s still an increase of 35%! These types of examples come up everywhere you look, and while there are some examples where prices haven’t increased by over 20% in the last four years, they aren’t nearly as apparent.
Getting back to the examples of price increases, one we noticed yesterday was postage. The US Postal Service just filed to increase the price of a stamp by 8% to 73 cents in July from 68 cents, The current price, it should be noted, only took effect in January when prices increased by 3%, so this would be the second increase this year and the fourth since the start of 2023! The chart below shows the monthly price levels of a first-class stamp since 1963, and you can see how the pace of increases has picked up steam in recent years. The last time a stamp cost 25 cents was in January 1991. The last time it was 50 cents or less was in late 2018.
In the chart below, we compare the four-year change in the price of a stamp to the four-year change in CPI. If the proposed postage increase takes effect in July, the four-year price change to mail a letter will reach 32.7%, the highest level since the mid-1980s. If CPI increases at a rate of 0.3% per month between now and June (a perfectly realistic, if not conservative rate based on recent CPI reports), the four-year change in CPI will reach 22.2% which would be the largest four-year increase since December 1984. To be fair, the rate of postage inflation still lags the rates from the 1970s, but it’s large and well above the Bureau of Labor Statistics’ official gauge. We should have loaded up on those Forever Stamps four years ago!
Read today’s entire Morning Lineup.
For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Fixed Income Weekly — 4/10/24
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!
Click here and start a 14-day free trial to Bespoke Institutional to see our newest Fixed Income Weekly now!
Bespoke’s Morning Lineup – 4/10/24 – Here it Comes
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.
“The road to Easy Street goes through the sewer.” – John Madden
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Investors have taken an optimistic tone this morning heading into the release of March CPI, but that could all change in a big way based on the report. The last several weeks have seen increased concern that inflation will be stickier than previously thought. While the market remains near all-time highs, most investors would say a higher-than-expected report is more likely than a weaker-than-expected one.
The recent breakout in gold and other commodities we discussed yesterday is one reason for investors to position for a higher-than-expected report. After years of stalling below resistance, gold finally broke out in early March and has ripped higher ever since.
While it hasn’t been stuck below resistance for nearly as long as gold, the yen has been simmering in a historically tight trading range just below 152. It first tested the 152-level late last year before rallying sharply into the new year (shown as a falling line in the chart). That rally quickly fizzled, and it wasn’t long before it was back to the low 150s range.
Over the last 15 trading days, the daily settlement price for the yen relative to the dollar has been confined to a 0.33% range, the narrowest since the late 1970s! The intraday chart below shows how the yen weakened to just below 152 in late March and has flatlined there ever since. In the last few days, it has inched closer to that critical level but keeps coming up short. At this point, it seems like only a question of when the yen will break through 152. After that will the move be as dramatic as gold’s move over the last month, or will it fail to live up to expectations?
Read today’s entire Morning Lineup.
For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Inflation, Poor Sales, and Fewer Jobs
The US data calendar has been light to start the week. Today, the only release of note was the NFIB’s reading on small business sentiment. While the index was expected to tick up to 89.9 from 89.4 in February, it instead dropped down to 88.5. That is the weakest reading since December 2012.
Given the weak headline number, breadth in this month’s report was terrible. Of the inputs to the Optimism index, only two rose month-over-month. Of those falling categories, one of the more standout declines was an 8-point drop in expectations for real sales. While there have been even weaker readings over the past couple of years, that monthly decline ranks in the bottom 5% of all months on record.
The survey also questions small businesses on what they consider to be their largest problems. These results echoed the deterioration in expectations for higher real sales. As shown below, the percentage of respondents reporting poor sales as their biggest issue has been on the rise. While 8% is far from a historically elevated reading, it is up significantly from the past two years.
Poor sales are not the only concern that ticked higher. The first three months of 2024 have seen hotter-than-expected CPI prints (which we discuss market responses in tonight’s Closer), and small firms are increasingly concerned with higher prices. As shown in the first chart below, a quarter of firms noted inflation as their single biggest problem. That erases any improvement in the reading since last May. Additionally, while the increase was much less pronounced, the higher prices index likewise ticked up. That returns this index to the top decile of its historical range.
In today’s Morning Lineup, we discussed the labor market indicators’ weakness as well as the weakness in capex plans per this report’s data. As shown below, each of these categories deteriorated in March with the exception of compensation (both actual and planned). The most significant decline has been hiring plans which is now down to the lowest levels since the spring of 2020. Prior to 2020, the last time the index was this low occurred in late 2016. While small businesses have cut back on hiring plans, they are also reporting job openings as hard to fill at similar levels to before the pandemic.
Bespoke’s Morning Lineup – 4/9/24 – Commodities Rolling
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.
“The most confident critics are generally those who know the least about the matter criticized.” – Ulysses S. Grant
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
There’s a positive tone to kick off the trading day this morning as equity futures are higher, yields are lower, and gold continues to rip. The only asset class seemingly not moving higher is bitcoin, but today’s weakness in the largest crypto follows what was a very positive day to kick off the trading week. The only economic report on the calendar this morning was small business optimism from the NFIB. The headline index came in weaker than expected, and labor market indicators, which we detail in today’s Morning Lineup, continue to show weakness even if there was no additional deterioration relative to February.
If it seems as though gold does nothing but trade higher these days, you’re not entirely mistaken. This morning, prices are higher once again as the commodity is on pace for its tenth up day in the last eleven trading days. That also includes four days last week where it traded up by at least 1%. What’s even more incredible is that heading into today, gold had traded higher on 22 of the last 30 trading days. That’s the highest winning percentage since March 2022, and the last time the 30-day rolling total of up days exceeded 22 was back in August 2020. Going back to the early 1980s, there have only been a handful of periods where the number of daily gains over 30 days was higher.
Gold’s rally has been part of a broader rally in the commodity space. The snapshot from our Trend Analyzer below shows where various energy and metals-related commodities closed yesterday relative to their short-term trading ranges. They’re all up at least 3%, and in most cases much more, in the last week, and most of them are more than 10% above their 50-day moving averages. As a result, it shouldn’t come as a surprise that the ETFs are all in what we define as ‘extreme’ overbought territory (at least two standard deviations above their 50-day moving averages).
Below we show one-year price charts of the six ETFs listed above. Outside of the Commodity Index Total Return ETN (DJP), which is comprised of more than just oil and metals, the five other ETFs are all trading tight at or near 52-week highs, but up until a few weeks ago, they were all somewhat range bound over the last two months. It wasn’t until early March that they really started to get rolling.
Read today’s entire Morning Lineup.
For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Bespoke’s Morning Lineup – 4/8/24 – Looking Up
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.
“Europe was created by history. America was created by philosophy.” – Margaret Thatcher
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US futures are little changed, but treasury yields are higher this morning with the 10-year yield above 4.45%. European stocks are firmly in positive territory as they play catchup to Friday’s strength in the US. The April reading of European investor sentiment from Sentix also came in less bad than expected in another sign that investor confidence around the globe has been improving. Gains in the short term are likely to be kept in check with this week’s ECB policy meeting looming on Thursday. No change in rates is expected, but markets are still pricing in a June cut, something here in the US that has been increasingly priced as less likely.
There’s not much in the way of economic activity to speak of this morning. The only report on the calendar is the NY Fed’s survey of Consumer Expectations, and the key metric to watch in that report is the reading on one-year inflation expectations. March’s reading showed a modest uptick from 3.00% up to 3.04% which was the first monthly increase since September, and that increase only added fuel to the fire of fears that the progress we’ve seen on inflation is starting to slow. From a broader perspective, though, last month’s increase came after eight declines in ten months. Not only that but including March’s increase, since the peak of 6.78% back in June 2022, expectations for inflation have declined in 15 out of the last 20 months. So, the road lower in inflation was never expected to be a straight line, but so far, there hasn’t been a break of the downtrend.
Read today’s entire Morning Lineup.
For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.