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.

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Energy Policy

Department of Energy Releases New Notice of Sale as Gasoline Prices Continue to Fall (The White House)

A new Biden administration initiative will start using futures markets in conjunction with the SPR, in an effort to balance the crude market’s term structure as well as the physical market, which can allow for easier market conditions without outright selling crude from the SPR. [Link]

Resource Nationalism and Decarbonization by Miguel Ángel Marmolejo Cervantes , Martín Obaya, Thea Riofrancos, and Alex Yablon (Phenomenal World)

A conversation discussing the prospects of nationalization and national management of decarbonized energy resources in Latin America. [Link]

How London Paid a Record Price to Dodge a Blackout by Javier Blas (Blooomberg)

The UK’s metropole only barely avoided a blackout in mid-July, but to do so it needed to pay 5000% more per hour than is typical. These sorts of shocks to the grid are becoming more and more common as resilience falls. [Link; soft paywall]

Growth Tech

Zuck Turns Up The Heat by Alex Heath & David Pierce (The Verge)

The trials and tribulations of the Meta CEO, struggling to manage a sprawling social media behemoth that is being nibbled at from all sides. [Link]

Changes to Shopify’s team by Tobi Lutke (Shopify)

A frank admission that the explosion in e-commerce activity during the pandemic didn’t continue, and investments made during that period are souring amidst a huge swing back towards normal spending from consumers. [Link]

Politics

Republicans Confront Unexpected Online Money Slowdown by

While political partisans on both sides of the aisle appear motivated, recent GOP grassroots fundraising efforts have dried up at a critical period for advertising spending headed into the midterm elections, in a potential warning sign for the party that has analysts puzzled. [Link; soft paywall]

Investing

The Secret Diary of a ‘Sustainable Investor’ — Part 1 by Tariq Fancy (Medium)

A rejection of the “sustainable” or “ESG” investing movement by one of its founding members, in favor of much bigger and more dramatic interventions in how our society consumes resources. [Link]

Demographics

Study: Millennials didn’t stray far from where they grew up by Mike Schneider (AP)

A new analysis of Census data suggests that narrow economic opportunity sets mean they tend to lead their adult lives close to where they grew up. [Link]

Remembering When Bob Dylan Shocked The World By Going Electric, On This Day In 1965 [Videos] by Rex Thomson (Live For Live Music)

An oral history of the night that folk music legend Bob Dylan decided to take a different tack, switching from his acoustic guitar to an electric one and forever changing how he was viewed as an artist. [Link]

Inflation

Cheaper Beer, Cigarettes Gain Favor as Inflation Pinches Shoppers by Jennifer Maloney and Alex Harring (WSJ)

Lower-priced value brands are seeing strong sales while premium offerings suffer, a response to pinched budgets and incomes that can’t keep up with broad prices. [Link; paywall]

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Have a great weekend!

The S&P 500 has gained more than 1% on each of the last four Fed Days going back to March.  The March meeting was the first rate hike of the Fed’s current tightening cycle, and every meeting since then has seen a hike of at least 50 basis points.  Each time, the S&P surged on the day of the hike.

The recent equity market strength on Fed Days is a new trend.  Market performance on Fed Days during Powell’s first few years at the helm was notoriously weak.  Below we show the S&P 500’s average intraday performance on Fed Days by Fed chair since 1994 when policy changes first started being announced on the same day as the meeting.  For Chair Powell, we show the S&P’s average performance on Fed Days during his tenure only through July 2021.  At the time a year ago, Powell Fed Days were by far the worst of any Fed chair, and the market typically plunged into the close after the 2 PM ET announcement.

What a difference a year makes.  Below we show the S&P’s average intraday performance on Fed Days by Fed chair updated through the most recent FOMC meeting this week.  Whereas Powell Fed Days were by far the worst for the market at this time last year, they’re now the second best behind only Bernanke Fed Days.

To highlight the improvement in the market response to Fed Chair Powell another way, below we show the full-day percentage change of the S&P 500 on Fed Days during Powell’s tenure as well as how the cumulative averages have evolved for both the full-day change and performance from 2:30 PM ET through the close (encapsulating the market response to the presser, or the chair more directly).

As you can see, the S&P was extremely weak on Powell Fed Days early on during his tenure, but over the last year, the market has reacted extremely positively.  Seven of the last eight Powell Fed Days have seen positive moves for the S&P, with the last four all seeing gains of more than 1%. Click here to learn more about Bespoke’s premium stock market research service.

Bullish sentiment measured by the weekly AAII survey has been a series of back and forth moves over the past several weeks.  After reaching the highest level in over a month last week, bullish sentiment fell back down to 27.7%.  Even with that decline, bullish sentiment has now managed to hold above 25% for at least three weeks in a row for the first time since the start of the year. We also must note, that the AAII survey collects data from Thursday at 12:01 AM through Wednesday 11:59 PM meaning any boost to sentiment from yesterday’s FOMC post-meeting rally will not necessarily be fully captured in this report.

Whereas bullish sentiment has had its fair share of back and forth moves, bearish sentiment has more consistently fallen with this week being the third sequential decline in a row.  Now at 40%, bearish sentiment is at the lowest level since the first week of June.

Given the drop in bulls was slightly smaller than that of bears this week, the bull-bear spread continued to move in a less negative direction.  However, in spite of any improvement, this week was the 17th negative reading in a row as that streak remains the third longest on record.

Not only have bears outnumbered bulls for 17 straight weeks, but there has actually only been one week this year (the final week of March) in which that was not the case.  As a result, this year is on pace to have averaged the lowest levels of bullish sentiment and the highest levels of bearish sentiment of any year in the survey’s history.

With both bulls and bears lower in the most recent survey, neutral sentiment picked up the difference rising to 32.2%.  That is the most elevated reading since April and back into the middle of the post-pandemic range. Click here to learn more about Bespoke’s premium stock market research service.

Initial jobless claims continue to disappoint. Although this week’s release technically fell down to 256K, it was from a 10K upwardly revised number of 261K last week.  Both this week and last’s readings are the highest since the fall and would also mark the highest readings since the fall of 2017 outside of the historically elevated readings of the pandemic.

The pandemic was a volatile time period for jobless claims data as readings rose into the millions.  As such, revisions over the past couple of years have gotten historically large in turn, albeit less so over the past year.  Although it may not sound like much, last week’s 10K revision was actually sizable.  It was the largest revision since the week of July 4th last year, and prior to the pandemic, the week before Christmas in 2012 was the last time there was a double-digit revision.

In his post meeting presser, Fed Chair Powell mentioned how the rise in initial jobless claims may be seasonal in nature. While we will provide some more in depth analysis to these comments in regards to the data in tonight’s Closer, as we have noted in the past, jobless claims have been roughly following standard historical seasonal patterns this year.  July typically sees a temporary seasonal spike higher, but as we noted last week, that seasonal peak appears to have been put in place a bit later than usual which is rare but not exactly an unprecedented occurrence.  While claims will likely get some seasonal tailwinds in the coming weeks (including this week of the year as claims have fallen around 90% of the time historically), the actual level of claims for the current week of the year is now well above comparable weeks for the few years prior to the pandemic. In other words, before or after seasonal adjustment, claims have come off their strongest levels and revisions have not exactly made things any better.

As for continuing claims, the latest week saw a 25K decline to 1.359 million.  While that does mark some deterioration from the strongest levels, unlike initial claims, continuing claims are still well below levels from prior to the pandemic indicating a still very healthy labor market the likes of which has not been seen in decades as the insured unemployment rate (continuing claims as a percentage of the number of those covered by state insurance programs) continues to hover near 1%. Click here to learn more about Bespoke’s premium stock market research service.