As we noted in an earlier post, today’s release of the AAII survey gives us the final reading of the year on sentiment, solidifying a number of points as to just how dour the investor outlook has been.

For starters, the bull-bear spread heavily favors bears, and that has been the case for some time now.  As shown below, the spread has been negative (meaning a higher share of respondents are reporting as bearish than bullish) for a record 39 weeks in a row- over a month longer than the previous record which occurred recently in 2020.

Across all weeks in 2022, bullish sentiment averaged a reading of merely 24.73%.  Since the survey began in 1987, that is a record low.  In fact, the previous lowest readings were a few percentage points higher at 27.29% and 27.08% in 1988 and 1990, respectively.  Meanwhile, the average reading on bearish sentiment was historically elevated at a record of 46.2%, surpassing the prior record set in 2008 by one percentage point. Prior to 2008/2009, only 1990 saw a very high average reading for bearish sentiment.

As we highlighted in an earlier tweet, given the low readings on bullish sentiment, there was not even a single week this year in which bullish sentiment came in above its historical average of  37.63%. Of course with a low share of survey respondents reporting as bullish, a larger share would be reporting as bearish. To match the impressive reading with no weeks seeing above-average bullish sentiment, nearly every week this year (51) has seen bearish sentiment come in above its historical average of 31%, tying the record high set in 2009.

As previously mentioned, bullish sentiment averaged a reading below 25% this year. Given that reading, it should come as no surprise that 2022 also saw a record number of weeks (30) with bulls below 25%. Prior to this year, 1988 (one year after the survey began) was the prior record at 23 weeks. In other words, this year there were nearly two months more in which less than a quarter of investors reported as bullish than the previous record. Additionally, there had been 17 weeks in which over half of the responses were bearish.  Similar to the number of weeks in which bearish sentiment was above average, that ties 2008 for the record high.  Click here to learn more about Bespoke’s premium stock market research service.

Initial jobless claims have not been of particular interest recently as the weekly indicator has seen choppy week-to-week moves that have yet to set any major new high or low.  In the latest release, seasonally adjusted claims rose to 225K, matching expectations for the highest reading since the first week of the month.  Looking at the four-week moving average to smooth out some of the choppiness, the number has fallen to 221K. This week was the third sequential decline in a row for the lowest reading since early November.

On a non-seasonally adjusted basis, claims tend to drift higher at the end of the year and into the new year.  For example, the current week of the year has historically seen unadjusted claims rise week over week 90% of the time since the data begins in 1967. That seasonal drift has appeared this year but to a lesser degree as the past couple of weeks’ increase in claims has been slightly less strong than normal.  Given this, claims are well below comparable readings from the years prior to the pandemic and up only slightly versus this point last year.

Continuing claims remain the more worrisome portion of the weekly jobless claims report.  The reading has continued to rise rapidly as this week’s reading eclipsed 1.7 million for the first time since February.

There are plenty of ways of measuring how fast continuing claims have risen, but looking at the 3-month rate of change, claims are up over 25%.  As shown below, this large of an increase has never occurred outside of a recession. Click here to learn more about Bespoke’s premium stock market research service.

Earlier today we published our Global Macro Dashboard which provides an overview of the main economic and market data of 22 major global economies.  In the table below, we show the recent performance of the ETFs tracking those same countries.

With 2022 drawing to a close, there are only two countries that are currently in the green for the year: Brazil (EWZ) and Mexico (EWW).  Neither are up much, but up is up, especially in a year like this one.

In terms of month-to-date change, Hong Kong (EWH) has risen the most with a 5.62% gain, while China (MCHI) is up a modest 0.46%.  On the other end of the spectrum, Taiwan (EWT) has fallen sharply with an over 20% decline, but most of that drop is actually due to a $5.18/share long-term capital gain that the fund paid out earlier this month. Click here to learn more about Bespoke’s premium stock market research service.

Yesterday Amazon (AMZN) became the third of the mega-cap FAANG+ stocks (along with META and NFLX) to close below its closing low made during the COVID Crash in March 2020.  Not only have all of AMZN’s post-pandemic gains been erased, but it’s now trading below its lowest close made during the COVID Crash!

NYSE’s FAANG+ index is described as an index of “10 of today’s highly-traded tech giants.”  Given that most of the FAANG+ stocks account for a massive portion of the market cap weighted S&P 500, they are an impactful group.  As shown below, the FAANG+ index peaked in early November last year and has dropped 46% since then. The drop more recently follows a failed breakout above the top of its downtrend channel as the index is now back to within 5% of this past November’s low. On a relative basis, the group has been underperforming the broader market for even longer with a high in February of last year.

Below is a look at the ten FAANG+ stocks.  As shown, they came into the year with a combined market cap of $12.3 trillion, and they’re ending the year with a combined market cap of just over $7 trillion.  While Apple (AAPL) has fallen the least YTD in terms of share price change, it has lost the most in market cap at $844 billion.  Amazon (AMZN) has seen its market cap fall the second-most at $843 billion, essentially getting cut in half.  Tesla (TSLA), along with AMZN, is one of two names that lost their “$1 trillion market cap” club status this year.  TSLA is now down 69% on the year, and its market cap has fallen from $1.06 trillion down to just $344 billion.  The other FAANG+ stocks that are down 50%+ on the year include Meta (META), NVIDIA (NVDA), Netflix (NFLX), AMD, and Snowflake (SNOW).

With markets continuing to drop in these final trading days of December, on an absolute basis, 2022 is going to go down as the biggest year of wealth destruction ever for the US equity market.  In 2008, the Russell 3,000 saw its market cap fall by $6.7 trillion.  As of today, the Russell 3,000’s market cap has fallen about $11.2 trillion so far in 2022.  $5.2 trillion of that $11.2 trillion decline has come from just the ten FAANG+ stocks shown below. Click here to learn more about Bespoke’s premium stock market research service.

Although the S&P 500 gapped up at the open, it has traded lower throughout the morning and is on pace to fall to start out the final week of the year.  As we noted last week, the final week of the year has not exactly been an overwhelmingly positive period for equities.  In the table below, we show the average daily performance of the S&P 500 ETF (SPY) for each calendar day since 1994.  Although December 26th has averaged the strongest gains of any day in December, this year that is a moot point with markets having been closed yesterday.  As for performance through New Year’s, seasonality has been unremarkable.

What is notable, albeit not exactly unexpected, is that this is typically the quietest period of the year.  Similar to the table above, below we show the average daily reading on volumes in SPY expressed as the percentage of the 200-DMA. Since 1994, average volume in the final week of the year has been roughly two-thirds of the norm. Interestingly, those low volumes are sandwiched between what are typically elevated volumes in the days leading up to Christmas and the early days of January. In other words, from a purely seasonal standpoint, it is unlikely that the rest of the week will be overly exciting.  Click here to learn more about Bespoke’s premium stock market research service.

Whereas Tesla (TSLA) had been a darling of the growth trade posting gaudy returns in the first year and a half of the pandemic, since November of last year it has turned into a major pain trade. While the weakness really extends out for more than a year, only looking more recently, the stock has been in free fall and is on pace for its seventh consecutive decline in a row.  As shown below, that is tied for the longest streak of consecutive declines since the IPO in 2010.  The other streaks of a similar duration were in September 2018, December 2014, and January 2013, and none of those streaks extended to eight trading days.  Although there is precedent for TSLA trading lower as consistently as the past week and a half, the current streak leaves the others in the dust in terms of severity.  Over those past seven-day streaks, the stock never declined 14% or more, and during one of the streaks (January 2013) TSLA fell less than 7%.  The decline in the stock during the current seven-day streak has been over 25%!

Again, that current stretch of weakness is not exactly new. Tesla has been grinding lower for over a year, and since peaking in November of last year, Tesla has seen its market cap dwindle from a high of over $1.2 trillion all the way down to only $363 billion today.  The drawdown from an all-time high in the stock’s price reached nearly 72% today and is the largest in the stock’s history, surpassing the previous record drop of 60.6% during the COVID Crash in early 2020. To get back to its prior record closing high, the stock would need to rally more than 250% from current levels. Click here to learn more about Bespoke’s premium stock market research service.