Predicting the direction of the US or global economy has always been a humbling profession, but doing it in the post-Covid economy where monetary and fiscal activity has gone into ‘Ludicrous’ mode only makes an impossible job even harder. The latest releases of global flash PMI readings for November from S&P Global only add to the already long list of examples. As discussed with the overseas releases in The Morning Lineup (link) earlier today, these indices make up about 85% of responses for the final PMI reading in a given month. As for the US, manufacturing activity, as measured by the PMIs, slipped back into contraction during November. Manufacturing PMI has now been at or below 50 for 12 of the last 13 months and the last 7 straight, and S&P Global noted that “demand conditions stagnated” at US factories. As for Services, activity beat and rose sequentially, marking the 10th straight month of expansion (a reading above 50).

As shown in the charts below, historically US PMIs have been a solid guide to global activity, explaining about 80% of the variation in global manufacturing and services activity. When we do the same analysis for the average across flash economies, we do even better as these readings explain 89% or more of the variation (0.89 for manufacturing and 0.94 for the services sector).

While the US readings and the average of the global flash readings have both done a good job as a guide to the global economy, their short-term moves in November were contradictory. In the charts below, we show the US, global, and an average of all the readings for economies that report flash PMIs. As shown, for both the manufacturing and services sectors, average flash data tends to be a pretty consistent guide to where global final data (green line) for a given month ends up and confirms the results from the chart above. For this month, though, in both the manufacturing and the services sectors, the direction of the US reading was in the opposite direction as the average flash readings of its global peers.  This is hardly the first (or the last) time these readings will move in opposite directions on a month-to-month basis, but it doesn’t help what is an already confusing environment to navigate.

The average Russell 3,000 (a combination of the large-cap Russell 1,000 and the small-cap Russell 2,000) stock is up just over 5% year-to-date on a total return basis.  Below is a list of the best performing stocks in the index so far in 2023.  All 28 stocks are up more than 200%.

The problem with some of this year’s big winners is that they’re still down significantly from highs made a couple years ago.  For example, below is a list of stocks that are up more than 100% this year but still down at least 25% over the last two years.  If you managed to buy these names in early 2023, congrats.  If you bought them towards the end of 2021, however, you’re still not even close to getting back to even.

To weed out this year’s winners that are still in massive drawdowns, below is a list of stocks that are up more than 100% this year and also up more than 75% over the last two years.  The list below contains the 27 stocks in the Russell 3,000 that fit this bill.  As shown, Super Micro Computer (SMCI) is on top with a 249% gain in 2023 and a 583% gain over the last two years.  Other names on the list that you might know include elf Beauty (ELF), Vita Coco (COCO), Abercrombie & Fitch (ANF), Duolingo (DUOL), and Builders FirstSource (BLDR).  The rest of the names on the list are more than likely names you haven’t read much about before.  If you have some time over the long Thanksgiving weekend, though, give them a look!

One trend investors have become used to over the last year is the outperformance of mega-cap stocks while seemingly every other stock in the S&P 500 struggles. In the four weeks since the October low on 10/27, though, there has been more uniformity in the gains.

The chart below breaks out the performance of S&P 500 stocks by decile with the largest stocks by market cap in decile one and the smallest in decile ten.  Across the S&P 500, the average performance of stocks in the index is a gain of 9.5% since the 10/27 close, and no decile is outperforming the average gain by more than 1.7 percentage points. Yes, the decile of the largest stocks is outperforming every other decile (when you look at performance out to two decimal places), but there hasn’t been an overwhelming leader in terms of performance.

The charts below show the same analysis for mid (S&P 400) and small (S&P 600) cap stocks. For the S&P 400, while there is a wide disparity between performance across different deciles, outside of the smallest decile also being the decile with the worst average performance, there’s been no correlation between market cap and performance. Finally, in the small-cap space, there has been even less correlation between performance and market cap as three of the four worst-performing deciles are right in the middle of the pack when it comes to market cap (Deciles 4, 5, and 7). Are the days of simply buying the largest stocks and watching them trounce the rest of the market numbered?

It’s been the worst of times and the best of times for the Nasdaq 100, which marked the two-year anniversary of its record high from 11/19/21 over the weekend.  After falling over 35% from the record high through the October 2022 low, the Nasdaq 100 has since rallied over 50%, leaving it down just over 5% from its record high.  Like a QB scrambling all over the field only to end up getting sacked a few yards short of the line of scrimmage, the Nasdaq 100 has expended a ton of energy with little to show for it over the last two years.

While the Nasdaq 100 itself is down just over 5% from its record high, stocks in the index are down slightly more than that since 11/19/21 with an average decline of 6.3%. Among individual stocks, though, there have been some big winners and losers. Starting with the winners, the table below lists the 20 Nasdaq 100 stocks that have rallied 20% or more since the November 2021 peak.  Leading the way higher, shares of Vertex Pharma (VRTX) have rallied just shy of 92%, followed by Broadcom (AVGO), PACCAR (PCAR), Diamondback Energy (FANG), and O’Reilly Automotive (ORLY), which are all up over 50%.  We were surprised to see that while NVDA has been one of the top-performing stocks this year, since the 2021 peak, its 49.5% gain ranks only as the seventh-best performance.  Lastly, in terms of sector breakdown, Technology leads the way with six followed by Consumer Discretionary with four, and Health Care and Industrials with three each.

While there are just twenty stocks in the Nasdaq 100 that are up 20% since its peak two years ago, 21 of the index’s components are down 30% or more.  We list them in the table below.  Topping the list of losers, shares of Lucid (LCIC) have lost their charge with a decline of over 90%.  Behind LCID, though, there are another nine stocks that have been cut at least in half, including pandemic darlings Zoom Video (ZM) and Moderna (MRNA).  Some of the more notable names on the list include Tesla (TSLA), Netflix (NFLX), and QUALCOMM (QCOM).  Finally, at the sector level, just as they topped the list of winners, both Technology and Consumer Discretionary also top the list of losers with seven and five components, respectively. The only other sectors with more than one component were Health Care (4) and Communication Services (3).