Only two weeks ago, bullish sentiment according to the AAII had collapsed to some of the weakest readings of the post-pandemic period. Over the past two weeks, sentiment has gradually recovered with a significant pick up in this final week of the year. Now at 37.7%, bullish sentiment gained 8.1 percentage points this week for the largest increase since October. While recovered, the actual level of bullish sentiment is far from notable essentially in line with the historical average of 38%.

The increase in bullish sentiment over the past two weeks largely borrowed from bears. Bearish sentiment fell 3.4 percentage points in the most recent week following a 5.4 percentage point drop last week. Now at 30.5%, the share of respondents reporting as bearish is right in line with the historical average.

Given the inverse moves of the two readings, the bull-bear spread is now back into positive territory after five weeks of negative readings. At 7.2, the spread is not particularly elevated and only 0.2 points away from the historical average of 7.4.

Not all of the gains to bullish sentiment have come from former pessimists.  The share of respondents reporting neutral sentiment has also unwound this week falling from 36.6% to 31.8%. That is the lowest reading since the first week of the month when exactly 31% of respondents reported neutral sentiment. Click here to view Bespoke’s premium membership options.

After holding above 200K the past two weeks, seasonally adjusted initial jobless claims dropped back below that level coming in at 198K. That compares to expectations of an unchanged reading from the revised level of 206K. While lower, claims remain above the multi-decade low of 188K from the first week of December.

On an unadjusted basis, claims were slightly higher rising by a little over 1K to 256.15K.  With the continued unwinding of the program, PUA claims fell below 1K for the first time.   Over the past few months, we have been noting the change in seasonal trends for initial claims. Historically, the final quarter has been marked by a period of rising claims whereas the opposite has generally been true in Q4 2021. The current week of the year, in particular, has seen claims rise over 90% of the time since 1967; ranking second behind the 27th week of the year (typically the last week of June/first week of July) as the week of the year that NSA claims most consistently increase on a week over week basis. While the rise in claims this week could have been expected, the uptick was much lower than normal as the current week of the year has averaged an increase of almost 50K. In other words, the trend in claims to close out 2021 has diverged from the normal trend.

Continuing claims saw a substantial drop this week with the adjusted number falling by 140K. That was the largest one-week decline since mid-October and the lowest level since the first week of March 2020.

Adding in all programs delays the data an extra week making the most recent reading as of the week of December 10th. That week saw regular state claims rise by over 93K to 1.828 million.  Albeit higher, that was still below the levels from two weeks prior.  Other programs similarly saw higher readings, but the Extended Benefits program provided a boost to the aggregate read on claims after being cut by 45.7%.   At only 67.5K versus 124.3K, this program has now seen the lowest reading since July 2020. As expected headed into year-end, this is another point showing pandemic era programs continue to account for increasingly insignificant portions of jobless claims. Click here to view Bespoke’s premium membership options.

In the table below, we show a breakdown of US-listed ETFs for the equity markets of the 23 major global economies that we track in our Global Macro Dashboard. In 2021, the United States’ S&P 500 (SPY) is headed out on top of the world with a year-to-date gain of 27.57%. December alone has been a solid month with a 4.7% gain as SPY reached a 52-week high only a few days ago. That being said, SPY’s MTD gain pales in comparison to Mexico (EWW) which has rallied double digits in December for the 21st best month on record in its history dating back to March 1996. But that has not brought it to a new high. In fact, in addition to the US, only Taiwan (EWT) and Switzerland (EWL) have also hit 52-week highs this month and these two countries also rank as the runner-up and fourth-best performing country ETFs in 2021. At the moment, SPY and EWL are also the most overbought with EWL currently over 2 standard deviations above its 50-DMA.  Panning across its peers, most country ETFs are below their own 50-DMAs with many down by at least a full standard deviation, though most have also been rallying this month.

The BRIC countries have been a particular area of weakness for US investors lately.  The Brazil (EWZ) and China (MCHI) ETFs have had a rough year with each being cut by around 25%. December in particular has seen sizable declines of 6.67% for MCHI and 5.52% for EWZ, which leaves it at a new 52-week low today.  Russia (RSX) has been hit even harder though having declined over 7% month to date.  India (INDA) too is lower, granted, it remains up double digits year to date. Click here to view Bespoke’s premium membership options.

The past two years have seen an explosion in new equity issuance in terms of the number of deals, and especially in terms of the dollar value of those deals.  According to Bloomberg data, US average monthly issuance has been $23.83 billion over the past year. That is well above any point in the past few decades including the late 1990s.  The actual number of stocks hitting the market has also set records this year, surpassing the 1990s peak.

While there has been a huge slug of new issuance, the performance of these names have been lackluster.  The Renaissance IPO ETF (IPO) does not necessarily track every new name to hit the market, but it does act as a reasonably good proxy for the space.  IPO reached an all-time high early in the year in February, but since then it has generally been rangebound fluctuating around its moving averages. Since the fall, and particularly in the past month and a half, the ETF has taken a significant leg lower.  IPO has now fallen over 18% since the October 25th closing high, taking out its moving averages in the process.  Today, IPO is setting up for what is typically viewed as a negative technical pattern: the death cross (when a downward sloping 50-DMA falls below a downward sloping 200-DMA).

IPO does not have an extremely extensive history only going back to October 2013, and as such, there is only a small handful of prior examples of other death crosses without another instance in the prior three months.  In the table below, we show those past instances.  Albeit there is a small sample size, contrary to the name and pattern’s reputation, prior death crosses have generally been followed by decent performance going forward.  Click here to view Bespoke’s premium membership options.

The only piece of economic data on the docket today was the Dallas Fed’s read on the region’s manufacturing sector for the month of December.  Overall activity continued to grow albeit at a decelerated pace.  The index last peaked this past April at one of the strongest levels on record.  The grind lower since then that includes a 3.7 point drop in the most recent month leaves the index at 8.1.

That current reading is in the middle of the historical range, but many other categories of the report remain at far healthier levels from a historical standpoint.  In spite of generally elevated readings and given the decline in the headline number, more components fell this month than moved higher. The declines in indices for expectations were both broader and more pronounced with several month over month declines ranking in the bottom decile of all monthly moves.

One general area of weakness in December was demand.  New orders decelerated modestly while there was a more substantial decline in unfilled orders.  That being said, unfilled orders remains one of the most elevated indices of the report.  Shipments were also lower, but the drop in expectations is probably more notable, setting a new post-pandemic low.

The employment situation generally improved with the index for number of employees rising to the second-highest level on record behind the April 2021 reading. Although more people were hired, wage and benefit growth slowed, even as it continues to run at unprecedentedly high levels. Hours worked were little changed. Bigger and inverse moves were seen in expectations and current conditions of Capital Expenditures.  The former saw the largest one-month drop since March 2020 while current conditions saw the largest one-month uptick since this past March. In other words, businesses continue to take on new workers, invest in capital, and pay higher prices for labor, but they do not expect this trend to be as strong in the months ahead.

The other notable area of this month’s report concerned prices.  Prices Paid experienced the biggest single-month decline since March 2020. That decline ranks in the bottom 5% of all monthly moves and it also is off of a record high.  Prices received, meanwhile, moved slightly higher gaining 0.1 point. As for some further insights into supply chains, while firms were paying less they were waiting longer as Delivery Times continue to rebound after declines in the spring and summer. Click here to view Bespoke’s premium membership options.

In our 2022 Outlook, we cover numerous topics to both sum up the year and give insights into 2022.  This report is available at all three subscription levels.  If you are not yet a member, sign up below to get access to the entirety of the repot by clicking any of the links below:

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