The Bespoke Report + Q3 Macro Report
This week’s Bespoke Report newsletter is now available for members.
This week we have published our weekly Bespoke Report plus our quarterly Macro Report by Bespoke Macro Strategist George Pearkes.
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Bespoke Morning Lineup – 8/19/22 – The 1962, 1970 Comp
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“If you don’t know who you are, the stock market is an expensive place to find out.” – Adam Smith, The Money Game
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
With August coming to an end soon and what has historically been the worst month of the year for the stock market — September — on deck, this morning we looked for years similar to 2022 that saw strong S&P 500 gains in the first two months of Q3 even though the index was still down big YTD.
Only two other years since WW2 really fit the bill. Both 1962 and 1970 saw 7%+ gains in the first two months of Q3 with the S&P still down more than 10% YTD through August. Below is a chart showing the YTD % change throughout the year in 1962, 1970, and so far in 2022. The patterns look quite similar, and it’s noteworthy that 1962 and 1970 were both mid-term election years for first-term Presidents, just like 2022.
In September 1962, the S&P fell 4.8%, but after that weakness, the index surged higher in Q4. In September 1970, the S&P rallied 3.3% and continued to gain sharply in Q4 as well. In both 1962 and 1970, the S&P was higher from the end of August through year-end. Investors would certainly take a repeat of that this year!
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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Total Return vs Price Change Spreads
As we mentioned in today’s Chart of the Day, there can be a wide spread between total returns and price change based on dividend yield. Although it doesn’t always make financial sense for a company to pay dividends, they can certainly magnify returns all else equal. Click here to start a two-week trial to Bespoke Premium and receive our paid content in real-time.
The table below outlines twenty S&P 500 stocks that have seen a high percentage of their returns over the last twenty years come from dividends. The average stock on this list has seen over 80% of their gains over the last two decades come from dividends alone. Although the average stock on this list has only seen a price gain of 61.1% since August of 2002, their average total return when factoring in dividends re-invested has been 278%.
To show you what we mean, below is a chart of price change versus total return over the last 20 years for Altria Group (MO). As you can see, the dividend in this case turns a below average stock into an outperformer. Click here to start a two-week trial to Bespoke Premium and receive our paid content in real-time.
The Bespoke 50 Growth Stocks — 8/18/22
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were three changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. You can learn more about our subscription offerings at our Membership Options page, or simply start a two-week trial at our sign-up page.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bulls Set a New High
Bullish sentiment continued its recent run of increases according to the weekly AAII individual investor sentiment survey. Hitting 33.3% this week, bulls are at the highest level since the last week of 2021. That 2022 is nearly 2/3 complete and we still haven’t seen a bullish reading over 33.3% tells you how negative investors have been this year.
Bears also ticked up this week reaching 37.2% versus 36.7% last week. While bearish sentiment has only been below 40% for three weeks in a row, that is the longest stretch of sub-40% readings since the start of the year.
With more bears than bulls once again this week, the bull-bear spread has now been negative for 20 straight weeks.
With both bulls and bears higher, neutral sentiment was the only reading to fall this week. Neutral sentiment dropped 1.7 percentage points from 31.2% down to 29.5%. That was only the lowest reading in four weeks as neutral sentiment sits the closest to its historical average of 31.4%. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke Morning Lineup — 8/18/22 — The Rise of the Utes
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap benefits from their mistakes.” – Edwin Lefèvre, Reminiscences Of A Stock Operator
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
US equity futures are slightly higher ahead of the open this morning as jobless claims just came in weaker (better) than expected and Philly Fed came in stronger than expected. Outside of the 8:30 AM ET data, there’s not much else going on today.
The S&P 500’s action around resistance at its 200-DMA continues to be watched closely by traders. Yesterday’s declines continued the pullback that began late in the day on Tuesday when the index touched up against the 200-DMA in afternoon trading. To get above the 200-day at this point, the index needs to rally about 1.25% from yesterday’s close.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
10-Day A/D Line Overbought for 15 Days
In an earlier tweet, we pointed out the elevated readings across 10-day advance decline lines in our Sector Snapshot. Not only is the 10-Day A/D line for the S&P 500 approaching one-year highs (as of yesterday’s close), but it has been “overbought” for the last 15 trading days.
Going back to the start of our data in 1990, there have only been eight other times in which the S&P 500’s 10-day A/D line has been overbought for 15 days in a row or more. The last time such a steak was observed was at the start of 2019 which ended at 22 days. That tied for the March 2016 streak for the longest on record back to 1990. We would also note that other than one streak in the first couple of months of 1991, nearly all of these long streaks with an overbought 10-day A/D line occurred since 2010. In other words, consistently impressive breadth by this measure has largely been a recent phenomenon.
This is not the only impressive breadth signal we have covered of late. For example, in yesterday’s Chart of the Day we highlighted that more than 90% of S&P 500 stocks were above their 50-DMAs. Prior times when we’ve seen that reading spike above 90% have been followed by strong returns in the months and year ahead. Looking at the past times in which the 10-day advance decline line has been overbought for 15 days in a row, forward performance of the S&P 500 has not been considerably stronger than the norm. From that 15th day, the S&P has risen half the time one week out. One and three month returns are more consistently positive but weaker than the norm on a median basis. In the year after the long overbought A/D streaks listed below, though, the S&P was higher 7 of 8 times for an average gain of 11.1%.
Below is a chart of the S&P 500 since its 2009 Financial Crisis low. As shown, most of these overbought A/D line streaks have occurred as the index was recovering from some sort of sell off. Only one of them (in early 2018) came about at the time of a notable peak in the index. Click here to learn more about Bespoke’s premium stock market research service.
Moving Averages Putting Up a Fight
Just as the S&P 500 ran into some resistance yesterday at its 200-day moving average (DMA), we’ve seen the same pattern play out in a number of commodities. Two of the more high-profile ones have been copper and crude oil.
Copper fell out of bed in the late spring and early summer, losing a third of its value. Along with the equity market, copper has seen a late-summer rally, but things came to a screeching halt right at the 50-DMA last Thursday. Copper has been down on two of the last three trading days and hasn’t been able to trade back above that elusive 50-DMA since. Click here to start a two-week trial to Bespoke Premium and receive our paid content in real-time.
Crude oil has been just as weak as copper lately, trading in a well-defined downtrend and breaking below its 200-DMA in early August. There was a little bit of a bounce last week, but resistance came into play at the 200-DMA, and after making another lower high, it has since made another lower low.
When stock, commodity, bond, or any other asset class is in a well-defined downtrend, the first thing they have to do to break out of their funks is clear resistance at key moving averages like the 50 and/or 200-DMA. In the case of copper and crude, they have both recently come up short. The S&P 500, again, is facing some resistance at its 200-DMA, but at least it has managed to clear its 50-DMA which it did in the second half of July.
Bespoke’s Morning Lineup – 8/17/22 – Not Much of a Second Effort
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“What started as a temporary measure driven by the pandemic is now our new standard.” – Brian Cornell
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
After Walmart (WMT) capped off the strongest earnings season for US stocks in years, a bit of a hangover appears to have set in for investors this morning. Futures were only modestly negative in the middle of the night, but there has been a steady drift lower throughout the early morning hours to the point where S&P 500 futures have traded down over 75 basis points as we type this. Looking for a culprit, earnings don’t fit as a narrative. The most high-profile report this morning has been Target (TGT) which reported weaker-than-expected results, but the stock is only trading down 2%. Hardly enough to warrant a decline of this magnitude. Trading in Europe may be to blame as major benchmarks in the region are down following a higher-than-expected inflation report in the UK that pushed the y/y rate above 10%. With the FOMC Minutes on tap, maybe investors are fearing some hawkish text in the minutes.
Whatever the cause, after yesterday’s rally screeched to a halt just shy of the 200-day moving average (DMA), the bulls’ second effort looks pretty weak at this point. We’ll see if Retail Sales either add to the misery or put a pep in the market’s step.
Today’s Morning Lineup discusses earnings and market news from Europe and the Americas, overnight economic data, and much more.
Walmart’s (WMT) earnings report after the close yesterday marked what we generally consider to be the unofficial end to earnings season. If you’re a bull, you’re probably sad to see this one come to an end. Through yesterday’s close, the S&P 500 was up over 10% since earnings season began July 8th, and that represents the best earnings season performance for the index since the Q2 reporting period in 2009! Since the start of 2009, the just-completed earnings season also marks the 13th time that the S&P 500 has rallied 5% or more during an earnings season (six weeks from the Friday before the first big banks report numbers).
With strong performance during the reporting period, the natural question for investors is whether the gains we have seen have been borrowed from the future. Looking back at prior strong earnings seasons, that doesn’t appear to be the case. In the 12 prior reporting periods, the S&P 500’s median change from the end of earnings season through quarter-end was a gain of 2.38% with positive returns 75% of the time. That’s actually modestly better than the median gain of 1.75% and positive returns 73% of the time for the remainder of all other quarters.
Instead of borrowing from future gains this earnings season, maybe the S&P 500 was just collecting on its ‘loan’ during the June swoon?
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Biggest Gainers Since 6/16 Low
Today marks two months since the mid-June low. At the time, the S&P 1500 had declined 23.5% relative to the January 3rd high. Since then, the index has recovered substantially, gaining 17.7% off of the low. Although the S&P 1500 is still 10.0% off of its closing high, these gains have been well received by investors as the market has shown resilience in the face of rampant inflation, worsening housing data, rate hikes, supply chain constraints, and increased labor costs. This rally comes as oil prices pull back, CPI came in lower than estimated for the month of July, and earnings come in better than expected. The graph below shows the price moves in the SPDR S&P 1500 ETF (SPTM) over the last twelve months. Click here to start a two-week trial to Bespoke Premium and receive our paid content in real-time.
Since the June low, there has been a reversal in performance trends, as the laggards have tended to lead the way higher (on a percentage basis) while the former leaders have generally lagged. Between the start of the year and the 6/16 low, Energy and Utilities were the best performing sectors, while Technology and Consumer Discretionary were the worst. Since then, we have seen the inverse as Technology and Consumer Discretionary have been the top-performing sectors while Energy has been the worst.
The chart below shows the 25 best-performing S&P 1500 stocks since the 6/16 low. As you can see, these stocks generally underperformed the broader index until the low, trading down by an average of 46.9%. However, since the lows, they are up an average of 90.4%, led by the newest meme stock: Bed Bath & Beyond (BBBY). Due to the drawdowns through 6/16, these stocks are still down YTD on a median basis (and even on an average basis), but they are an average of 47.6% above their 50-DMAs and 22.3% above their 200-DMAs. They’ve come a long way, and shown in the charts below, many have reached some extremely stretched levels, but even after the rallies, they still have a ways to go before coming out of the darkness. Click here to start a two-week trial to Bespoke Premium and receive our paid content in real-time.
Six-month price charts for each of these stocks are included below. You can track a custom portfolio of these names by clicking here.
