Small Business Sentiment Wild Ride
This morning was light for economic data with the only release of note being the NFIB’s Small Business Optimism index. The headline number was expected to pull back following the post election surge, but the decline was larger than expected as it came in at 102.8 versus forecasts of 104.7. That being said, as shown in the chart below, small business sentiment is still up huge since last November’s election.
In the table below, we show the readings across the report’s sub-indices for January and December, the month over month change, and how those all rank as a percentile of all periods. As shown, the Optimism Index’s decline in January was actually quite large falling in the bottom decile of all months’ moves. Playing into that were bottom decile declines in a number of inputs like: inventory plans, expected credit conditions, viewing now as a good time to expand, and capital outlay plans. For that last category, the 7-point drop was actually a record single month decline. That is also only one indicator of a number that point to softening capex and labor market conditions which we discussed in today’s Morning Lineup.
As shown in the table above, breadth in January was weak on the whole. For all categories (both inputs and non-inputs for the headline index), there were ten indices that fell month over month versus six that rose while another two were unchanged. Looking at the decliners, most of the categories are expectation or plans based. Contrary to that weakness in soft data, hard data indices like actual earnings and employment changes were generally the ones that improved versus December.
In the charts below, we create indices tracking the strength of hard and soft data categories in the report. Following the election, the soft data index soared as expectations and optimism massively improved given small business sentiment has a tendency to favor Republicans. The historically strong readings in that index left more muted hard data in the dust. With that said, January saw the soft data index revert lower although it is still at solid levels in the 63rd percentile of readings. Meanwhile, hard data has continued to improve and is now at the highest level since September 2023.
Again, although the January report showed some moderation in small business optimism, reporting firms are still extremely optimistic. For example, the index of Outlook for General Business Conditions pulled back but remains in the top 2% of readings in the survey’s history. Likewise, the share of respondents reporting now as a good time to expand is around some of the highest levels of the past few years.
The NFIB offers a breakdown of reasons given for expansion outlooks. As shown in the second chart below, the strength in positive expansion outlooks has been largely driven by politics. Similarly, those giving uncertain outlooks have less frequently been pointing the finger at politics, however, there was an identical share in January that said costs of expansion was the reason for uncertainty. Unchanged at 7%, that was the highest reading since February 2020. Perhaps most notably, for those reporting an uncertain outlook, a record 22% share blamed economic conditions.
As much as a shifting political landscape has benefitted small business optimism, January did also see an interesting spike higher in the percentage of businesses reporting taxes and government red tape as their biggest issues as the threat of tariffs were quickly introduced. That reading rose to 27% of responses which was the highest since November 2021.
One other indication that Trump’s tariff plans have caused some trepidation among small businesses is the Economic Policy Uncertainty index. As shown below, during election years it is normal for this index to rise sharply. This most recent election was a prime example with the largest election year jump to date. While things moderated significantly in the wake of the election with a 24 point decline from the October report through December (also a record for all prior election years), the most recent reading for January showed a 14 point month over month rebound. Not only is that the largest jump of any inauguration month, but it is also the largest month over month increase in the index’s history.
Bespoke’s Morning Lineup – 2/11/25 – Powell Heads to the Hill
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“Common sense is the most widely shared commodity in the world, for every man is convinced that he is well supplied with it.” – René Descartes
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures are moderately lower this morning with technology leading the way to the downside as markets digest the latest round of tariffs from the President last night. Treasury yields and crude oil are higher, and the only economic report of the day – the NFIB Small Business Optimism survey showed a modest deterioration after the historic post-election surge.
As you probably know by now, this is an important week for interest rates. It starts with today’s Senate testimony by Fed Chair Powell. Then, we’ll get CPI and more Powell testimony at the House tomorrow. Thursday will cap things off with PPI, but there will also be plenty of other Fedspeak sprinkled in between. Maybe all this Fed/inflation news will allow the market to shift some of its attention from the White House!
Heading into today’s Powell testimony, Treasury yields are at an important juncture. The 10-year yield saw a sharp decline from its mid-January peak of 4.8% down below 4.4% but increased in the last few days moving back above 4.5% this morning. As shown in the chart, these levels put the 10-year yield back above its 50-day moving average (DMA) but still below the uptrend line that was broken to the downside last week. It’s common to see a test of a former trend line after it has been broken, and how that test turns out in the short term can often signal the intermediate-term direction going forward. An upside break would potentially signal higher rates going forward while a failed test could indicate a longer downtrend in rate from here.
The Closer – Inflation Expectations, Mortgages, Auctions – 2/10/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look at the latest inflation expectation data (page 1) followed by a review of the other data featured in the New York Fed’s Survey of Consumer Expectations (page 2). Afterward, we check in on mortgage rates and earnings (page 3) and then preview this week’s Treasury issuance (page 4). We then close with a weekly recap of positioning data (pages 5 -8).
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Q4 2024 Earnings Conference Call Recaps: Illinois Tool Works (ITW)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Illinois Tool Works’ (ITW) Q4 2024 earnings call.
Illinois Tool Works (ITW) is an industrial manufacturer operating across seven business segments, producing specialized components, equipment, and consumables for automakers, construction firms, semiconductor manufacturers, food service providers, and others. The company’s performance offers insights into industrial demand, global manufacturing trends, and capital spending across key markets. ITW closed its year out with record margins and free cash flow despite macro uncertainty. Automotive OEM outperformed industry builds, especially in China, where ITW gained market share in EVs. Semiconductor and electronics markets showed early signs of recovery, while construction remained soft due to weak housing starts. Food equipment saw strong service demand (+5%). ITW remains cautious on 2025 demand, forecasting 1-3% organic growth, but expects another 100 bps of margin expansion. Tariffs remain a watch item, but ITW is confident in its pricing power. ITW shares were flat on 2/5 after posting mixed results…
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Q4 2024 Earnings Conference Call Recaps: Yum! Brands (YUM)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Yum! Brands’ (YUM) Q4 2024 earnings call.
Yum! Brands (YUM) is one of the world’s largest restaurant companies, owning iconic fast-food chains KFC, Taco Bell, Pizza Hut, and Habit Burger. With over 60,000 locations in 155 countries, the company operates a heavily franchised model. Digitally, YUM is a leader within the quick-service industry, with over 50% of system sales now coming through digital channels. In Q4, YUM delivered 5% system sales growth, despite headwinds in some international markets. Taco Bell US led the way, with 6% full-year system sales growth and strong consumer engagement, including the successful $7 Luxe Box and Decades platform. KFC International rebounded, with sales in the Middle East up 11% in Q4 after a tough year, while Africa and Latin America posted mid-to-high single-digit growth. Pizza Hut struggled in the US but improved internationally, with new digital-focused store concepts rolling out. YUM also introduced Bite by Yum!, a proprietary tech suite aimed at accelerating AI-driven personalization and digital sales, which grew 15% in 2024. After beating estimates, YUM shares climbed 9.7% on 2/6…
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Q4 2024 Earnings Conference Call Recaps: Walt Disney (DIS)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Walt Disney’s (DIS) Q1 2025 earnings call.
Walt Disney (DIS) is a global entertainment powerhouse spanning film, television, streaming, theme parks, and consumer products. Its content empire includes Disney, Pixar, Marvel, Star Wars, and ESPN, making it a dominant force in storytelling and media. DIS’s Q1 2025 results were indicative of streaming growth and solid momentum in its parks and experiences going forward. The company had the top three films of 2024 at the global box office and continued subscriber growth for Disney+ and Hulu, despite recent price hikes. ESPN’s transition to digital took center stage, with plans to launch its flagship streaming service in the fall, bundling it with Disney+ and Hulu. Parks and cruises performed well, with bookings up for the summer. Cost-cutting remains a priority, with content spending trimmed to $23 billion. DIS is betting on AI and personalization to improve its streaming experience, while ESPN’s 24/7 live content positions it strongly in an evolving sports media landscape. On mixed results, DIS shares fell 2.4% on 2/5…
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Q4 2024 Earnings Conference Call Recaps: Uber (UBER)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Uber’s (UBER) Q4 2024 earnings call.
Uber (UBER) is in the mobility and delivery services business, operating a platform that connects riders, drivers, and merchants in over 70 countries. The company provides ride-hailing, food delivery (Uber Eats), freight logistics, and expanding autonomous vehicle partnerships. In Q4, gross bookings rose 21% YoY, exceeding expectations, while Uber One membership grew 60% YoY to 30 million. Expansion into less dense markets and investments in driver incentives helped mobility gross bookings grow 24% YoY. Uber Eats saw merchant count rise 16%, strengthening its grocery ambitions. On autonomous vehicles, Uber reinforced its role as a go-to-market partner but said commercialization will take longer. Insurance costs remain a challenge, but price moderation is expected in 2025. Despite better-than-expected results, UBER fell 7.5% on 2/5…
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Q4 2024 Earnings Conference Call Recaps: Spotify (SPOT)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Spotify’s (SPOT) Q4 2024 earnings call.
Spotify (SPOT) is the world’s largest music streaming platform with over 100 million tracks, 6 million podcasts, and a growing library of audiobooks that it offers to its active users (MAUs). The company pioneered the freemium model, allowing users to stream music for free with ads or subscribe to premium tiers for an ad-free experience. SPOT closed 2024 on a high note, reporting record-breaking monthly active users (675M, +35M QoQ) and premium subscribers (263M, +11M QoQ). AI-driven product enhancements and expanded video podcast offerings fueled engagement, with over 330,000 video podcasts now on the platform. The annual Wrapped campaign saw 245M+ users participate, driving brand visibility and subscriber growth. While ad revenue rose 6% YoY, Spotify admitted it was late in shifting to programmatic ads but expects momentum in 2025. Price increases remain key, and a new “super fan” tier is in development. CEO Daniel Ek dubbed 2025 the “year of accelerated execution,” emphasizing speed in product innovation and monetization. On mixed results, SPOT shares rose 13.2% on 2/4…
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Bespoke’s Morning Lineup – 2/10/25 – Chaotic?
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“To become good at anything you have to know how to apply basic principles. To become great at it, you have to know when to violate those principles.” – Garry Kasparov
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 equities sold off throughout the trading session on Friday on concerns that there would be another round of tariff headlines over the weekend that would send stocks lower to kick off the week. Well, we did get another round of tariff headlines (25% tariff on all steel imports to the US and the potential for reciprocal tariffs later in the week). Still, equity futures have taken the news in stride so far, and the major averages are all indicated to open with gains of between 0.4% and 0.7%. As the Super Bowl showed us last night, while the Chiefs were favored and everyone was expecting a close game, outcomes don’t always match expectations.
For just about everyone on the planet, it’s been nearly impossible to stay on top of everything going on in Washington over the last few weeks. And for those who have been trying to keep up, it’s been exhausting. In the Old Testament, even God rested on the seventh day! Since the Inauguration, though, whether you love or hate him, we can all agree that President Trump’s second term has started with a nonstop fire hose of news and headlines.
Amid the backdrop of a nonstop news flow, the market has been surprisingly calm. Over the last 100 trading days, the S&P 500 ETF (SPY) has traded in a relatively narrow range of less than 10%, and Friday’s close was essentially right where the market was just days after the election.
10% may sound like a wide range, but it ranks in just the 13th percentile of all 100-trading day periods dating back to SPY’s inception in 1993. Back in Covid, this reading spiked above 50% and during the Financial Crisis, it widened even more, peaking above 75%!
In the post-Covid era, the current narrow range is even more extreme. As shown in the chart below, there have only been two other times when the 100-trading day range dipped below 10%, and the current level of 9.4% is the lowest of any of them. Let this be a word of advice, the market may seem volatile now, but you can guarantee that things will get more volatile in the weeks ahead.
Brunch Reads – 2/9/25
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles 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.
Wartime Work: On February 9th, 1943, in the midst of World War II, President Franklin D. Roosevelt took decisive action to ramp up the nation’s industrial output. He signed an executive order mandating a minimum 48-hour work week in key war industries, ensuring that American factories could keep up with the relentless demand for weapons, ammunition, and military supplies. With millions of men fighting overseas, the government had already enlisted women, older workers, and even teenagers to fill gaps in the workforce. However, some industries were still struggling to meet quotas. While labor unions initially resisted extending workweeks, many ultimately accepted the decision as a necessary sacrifice for the war. Roosevelt’s directive was part of a broader wartime economic strategy that saw the US emerge as the “Arsenal of Democracy.” By the war’s end, America had produced an astonishing volume of planes, ships, and tanks, outpacing Axis powers and helping to secure victory.
AI & Technology
Elon Musk’s DOGE Is Working on a Custom Chatbot Called GSAi (WIRED)
Elon Musk’s Department of Government Efficiency (DOGE) is fast-tracking the rollout of AI across federal agencies, spearheading efforts to create “GSAi”, a custom AI chatbot for the General Services Administration. Part of Trump’s AI-first strategy, it would help automate government workflows, analyze massive procurement data, and boost efficiency. However, there are concerns over security risks and the rushed implementation. While Musk’s team initially considered using Google Gemini, they opted to build an in-house system instead. [Link]
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