Consumer Confidence took a rest in May as the headline index dropped slightly falling from 117.5 (revised down from original 121.7) to 117.2 and more than a point and a half below consensus forecasts of 118.8.  Despite the weaker than expected report, confidence levels have recovered more than half of the declines from the pre-COVID highs.

One very strong aspect of the report this morning was the Jobs Plentiful index which surged 29% versus April, marking the third straight m/m gain of over 19% during which time the index has doubled.  That’s easily the largest ever three-month gain in the index. Jobs are so plentiful now that the index is actually higher than it was back in February 2020 when people were still figuring out what COVID was right before the WHO declared it a pandemic in March 2020.  With a record number of job openings per the JOLTS survey and consumers viewing the ability to find a job just as easy now as it was before the pandemic, it once again leads back to the question of why there are 8.2 million fewer Americans working now than there were in February 2020?

On another note, it’s really just a matter of semantics at this point, but since the mid-1960s there has never been another period where the Jobs Plentiful index erased this much of its losses and the economy was still in a recession.  The NBER is the organization in charge of dating recession start and end dates, and while it isn’t meant in any way to be a timing indicator, at this point the recession is not only over, but it has been for about a year now. Going back to 1980, the median number of days between the end of a recession and when the NBER makes the official announcement is 476 days.  Based on that, we could expect the NBER announcement to come out sometime later this Summer.  Click here to view Bespoke’s premium membership options for our best research available.

In the five days ending last Friday, by far the best performing major US index ETF in our Trend Analyzer was the Micro-Cap ETF (IWC) with a 1.65% gain. That also places it in the top spot in terms of YTD performance. In spite of that outperformance, it finished last week as one of just three ETFs in the screen that is below its 50-DMA. Up another 0.59% so far today, IWC is continuing to close in on getting back above its 50-DMA.  While micro-caps have done well, other small-cap indices like the Russell 2000 ETF (IWM) and the Core S&P Small-Cap ETF (IJR) have done far worse.  Yet worse still were S&P 500 Mid-Cap ETFs (IJH and MDY) which found themselves at the bottom of the list in terms of 5-day performance.  But not all mid-cap indices were the biggest losers last week. The broader measure of the mid-cap space, the Russell Mid-Cap ETF (IWR)—which tracks the 800 smallest stocks in the Russell 1000 whereas the S&P mid-cap ETFs track the S&P 400—was likewise lower over the five days ending last Friday, but its loss was much smaller at 18 bps versus the over 1% decline for IJH and MDY.

Breaking that down further, growth was the key to this stronger performance for the Russell mid-caps.  The Russell Mid-Cap Growth ETF (IWP) saw a standout performance with a 1.28% gain last week compared to a 0.83% decline in the value counterpart, the Russell Mid-Cap Value ETF (IWS).  Other growth ETFs like the Russell 2000 Growth ETF (IWO), Russell 1000 Growth ETF (IWF), and the broader Growth ETF (VUG) were the only other tickers in the US Styles screen of our Trend Analyzer that were in the green last week, though, they all were up by a full percentage point less.

Again, in spite of also tracking mid-caps, the S&P’s ETF also underperformed with the S&P Mid-Cap Growth ETF (IJK) falling 0.69%. One possible reason for the outperformance of the Russell Mid-Cap Growth ETF could be a rotation into what has been this year’s losers.  Although it outperformed in the past week, IWP is still the worst performer on the year with other growth ETFs not far behind.

Below we show the ratio of Russell Mid-Cap Growth (IWP) versus the value counterpart (IWS) and the broader Russell 1000 (IWB) over the past five years.  When the line is trending higher it indicates mid-cap growth is outperforming and vice versa when the line is trending downward.  In the first half of last year, growth took off relative to value but from the second half of 2020 into early 2021, that outperformance trailed off as the line moved sideways. Since February, there has been a sharp reversal with two significant legs lower with the most recent one lasting from the end of April through earlier this month.  The recent bout of strength from mid-cap growth in the past week is basically just a blip within those declines, but it does mark a bounce from around the past few year’s trend in the ratio.  It is a similar story relative to the broader Russell 1000 as well.

Taking a look at IWP’s chart, last week’s solid performance appears to be carrying into this week with IWP up another 1.15% today which puts it on pace to move back above its 50-DMA. But even though there has been strength in the very short term, IWP’s longer-term trend still has plenty of room for improvement.  The 50-DMA has been trending sideways as the ETF has been in consolidation for most of the year since hitting a 52-week high in February. Currently, at its 50-DMA, IWP is right in the middle of that consolidation range. Click here to view Bespoke’s premium membership options for our best research available.

The last several days have been quite the roller coaster ride for bitcoin. Since last Friday, the one-day moves (remember it trades on the weekend) have been down 12%, up 8%, down 11.5%, and up 12.3% today!  Even for bitcoin, this is some crazy volatility.

If today’s gain in bitcoin holds above the 8% level (or if it reverses and trades down 8%), it will be the first four-day streak of daily moves of 8%+ since 2013!  Going all the way back to the start of 2011, there have only been four other periods where bitcoin experienced longer streaks of daily moves of 8%+.  What makes the streak even more notable this time around, though, is bitcoin’s market value.  The last time bitcoin experienced a similar streak, it was trading at under $300 per coin.  Today, it’s more than 100 times that at over $38,000 for a total market value of more than $700 billion!

While the last four days have been incredibly volatile for bitcoin, its volatility over the last month hasn’t been nearly as extreme. Over the last 30 days, bitcoin’s average daily move has been just under 5%.  This is now just barely above its most recent peak earlier this year but still above the prior peak of 5.5% seen last April.  Click here to view Bespoke’s premium membership options for our best research available.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read 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.

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COVID

A COVID Outbreak Is Plaguing Climbers on Everest by Dewan Rai and Ben Ayers (Outside)

At least 22 climbers and Sherpas at the Everest Base Camp have COVID diagnoses, forcing expeditions to abandon their climbs and complicating an already complicated logistical backdrop at the foot of the world’s tallest mountain. [Link]

Statewide Reopening During Mass Vaccination: Evidence on Mobility, Public Health and Economic Activity from Texas by Dhaval M. Dave, Joseph J. Sabia & Samuel Safford (NBER)

Reopening in Texas did not accelerate COVID cases because individuals did not change behavior in aggregate after the policy shift; that also means that claimed benefits related to employment did not materialize either. [Link]

Investing

Trump Allies Promote Portfolios Targeting ‘Unwoke Investors’ by John McCormick (WSJ)

In an age reaction, for every action there is a pushback. In this case, ESG strategies are getting a counterweight with portfolios designed to overweight stocks perceived as appealing to conservative values. [Link; paywall]

Fidelity’s Pitch to America’s Teens: No-Fee Brokerage Accounts by Justin Baer (WSJ)

The brokerage company is aiming to introduce teens to investment with debit cards and brokerage accounts for the children of existing Fidelity clients. [Link; paywall]

EVs

The 2022 Ford F-150 Lightning Is the Future of America’s Workhorse by Brian Silvestro (Road & Track)

A review of the Ford F-150 Lightning fully electric pickup, unveiled this week in Michigan, offers 230-300 miles of range and between 420 and 560 horsepower, along with a front trunk, crew cab, and super-affordable price point relative to competitors. [Link]

Zero-emission, all-electric flight is closer than you think by Justin Gerdes (Energy Monitor)

A small regional airline that operates seaplane flights along the coast of British Columbia is in the process of certifying battery-powered planes, with multiple test flights per week run since the end of 2019. [Link]

Getting Out Of Hand

Amazon’s Ring is the largest civilian surveillance network the US has ever seen by Lauren Bridges (The Guardian)

10% of American police departments can access video footage from Amazon’s Ring doorbells…without any warrant. Tens of thousands of requests have been made, offering police a work-around that skirts Fourth Amendment protections. [Link]

‘Collectibles versus commodities’: As Target halts sales of trading cards, collectors reckon with fast-changing hobby by Jacob Bogage (WaPo)

Target is taking playing cards off the shelves after a dispute over collectibles outside one of its Milwaukee stores led to violence and multiple arrests. [Link; soft paywall]

Panhandle Boom

ECP Airport has highest passenger numbers in April since its original opening by Madalyn Bierster (My Panhandle)

Northwest Florida Beaches International, just north of Panama City, is seeing all-time record traffic as foreign tourism takes a back seat to domestic destinations. Booming arrivals are fueling a renaissance in Florida Panhandle tourism. [Link]

Philanthropy

Giving Billions Fast, MacKenzie Scott Upends Philanthropy by Nicholas Kulish (NYT)

After receiving 4% of outstanding AMZN shares in her divorce two years ago, MacKenzie Scott is breaking the mold of philanthropy by actually giving away money, a stark contrast to the traditional approach of foundations that pay out as little cash from their holdings as possible. [Link; soft paywall]

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Have a great weekend!

While the overall trend of economic data has been for further improvement, things have slowed recently relative to expectations.  In the charts below, we show the charts of the Citi Economic Surprise indices for the US, Emerging Markets, the Eurozone, and the entire world.  Broadly speaking, positive readings indicate that economic data is coming in better than forecasts while negative readings indicate the opposite.  Every region of the globe has pulled back over the past couple of months but for the most part, current readings remain at the high end of their historical ranges.  In fact, the indices for Emerging Markets, Eurozone, and the whole globe all sit in the top 3% of all readings in their histories. The one place that is not the case is the US.  Since last summer, the surprise index has been trending lower off of record levels, and just yesterday, it hit it tipped negative for the first time since June 2nd of last year.

Lasting 248 trading days, this was the longest streak of consecutive positive readings in the index’s history dating back to 2003.  The only other streak that lasted nearly as long was a 189 day long one which came to an end in June 2018.  Click here to view Bespoke’s premium membership options for our best research available.

The S&P 500 has been holding up at its 50-DMA in the past week while more speculative areas of the market (i.e. crypto) have experienced wild swings. As a result, sentiment on the part of individual investors has not seen much of a move.  The American Association of Individual Investors‘ weekly reading on bullish sentiment was little changed this week climbing half of one percentage point to 37%.  Although that was not a large move in the past week, sentiment has taken a big hit over the past month having fallen from well above 50%.  In spite of that big drop and even though sentiment is around the lowest levels of the past half-year, the current sentiment level is within one percentage point of the historical average. In other words, optimism is low versus recent history but is very much middling from a longer term perspective.

Meanwhile, bearish sentiment fell 0.7 percentage points to 26.3%.  Unlike bullish sentiment, that is a bit lower than the historical average of 30.5%

Those corresponding moves meant the bull-bear spread climbed to 10.7 from 9.5 the prior week.  Excluding last week, that is still one of the lowest readings since February.

Neutral sentiment has been the star of the show recently. The gain this week was tiny at only 0.2 percentage points, but nonetheless, it marked the fifth consecutive week in which neutral sentiment has risen.  At 36.7%, it is now at the highest level since the second week of 2020.

The Investors Intelligence survey of equity newsletter writers took a less optimistic tone this week as bullish sentiment fell 4.1 percentage points to a ten-week low of 54.5%.  Bearish sentiment was unchanged at the highest level since the end of March.  The survey also questions respondents on whether or not they expect a correction.  That reading rose 4.1 percentage points to 28.3% in the biggest one-week uptick since the last week of April when it rose 4.7 percentage points. That leaves the reading at the highest level since the week of March 10th.  Before that, you would need to go back to September 23rd to find as high of a reading.

Another sentiment reading that has taken an even more dramatically negative tone lately has been the National Association of Active Investment Managers Exposure Index.  This index measures how exposed to equities managers are where readings of 200 would mean they are leveraged long, 100 would be fully invested long, 0 would be neutral, -100 is fully short, and -200 is leveraged short.  This week saw the index fall another 2.65 points after a massive 40-point decline last week. That is the lowest level since last March and April of last year. Altogether, while sentiment still favors bulls, there has been a more cautious tone that has been reflected in managers reducing exposure to equities.  Click here to view Bespoke’s premium membership options for our best research available.

Recent jobless claims prints have seen the readings on initial claims consistently fall to pandemic lows while continuing claims have been a bit weaker moving sideways or even slightly higher.  This week, it was more of the same.  Initial claims came in at the lowest level since the week of March 13th of last year; the last week before the pandemic caused claims to rise by the millions per week.  At 444K this week claims dropped by 34K from last week’s revised level of 478K (original of 473K).  That was also better than expected as forecasts were calling for a decline to only 450K.  Initial claims have now fallen three weeks in a row with the drop totaling 146K in that time.

On a non-seasonally adjusted basis, claims were likewise lower for a third week in a row coming in at 454.6K which again is the strongest reading since last March. With regards to Pandemic Unemployment Assistance (PUA),  there have been several states to recently announce that they are to various extents doing away with certain programs like PUA early even though on a federal level the American Rescue Plan extended benefits through September. Without getting into the weeds on the implications of this, we would note those announcements do come in the context of very small inflows into auxiliary claims programs like PUA.  This week, PUA claims fell below 100K for the first time after falling 8.6K to 95.09K.

In spite of decelerating inflows into the unemployment insurance systems, the continuing claims picture continues to worsen.  Continuing claims were expected to fall from last week’s revised reading of 3.64 million to 3.62 million, but instead, they rose 111K.  That brings continuing claims to the highest level since mid-March and makes this week’s increase the largest in a single week since the last week of November.

Factoring in all other programs for a more complete picture adds an extra week’s lag to the data. By this measure, things look better than looking purely at regular state claims.  Total claims across all programs fell to just above 16 million at the end of April compared to 16.891 million the week before; a new low for the pandemic. PUA claims contributed the most to that overall decline with the program seeing 678.7K fewer claims week over week.  At 6.6 million, continuing PUA claims reached the lowest level since the first week of May of last year.  Regular state claims and Pandemic Emergency Unemployment Compensation (PEUC) had the next biggest contributions to the overall decline with drops of 81.9K and 150.2K, respectively.    Click here to view Bespoke’s premium membership options for our best research available.