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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Sentiment Check

Stock Selloff to Intensify as Fresh 10% Plunge Looms, Survey Finds by Benjamin Purvis (Yahoo!/Bloomberg)

A survey of Bloomberg Terminal users reckon the US equity market bottom is around 10% lower near 3500, a brutal 27% decline from last year’s peak. At the very least, that’s a serious insight into the sentiment of institutional investors here. [Link; auto-playing video]

The Market Is Melting Down and People Are Feeling It. ‘My Stomach Is Churning All Day.’ by Justin Baer (WSJ)

Stock market bulls have started to panic with a bear market for the S&P 500 in sight, as concerns over everything from retirement security to availability of down payments and other spending gets dragged down by the market’s plunge. [Link; paywall]

Scarcity

The Trouble With Lithium by Annie Lee (Bloomberg)

Lithium has once again reared its head as a critical bottleneck and cost pressure for everything from energy storage to electric vehicles, with recent price increases working out to more than $1,000 per vehicle of additional costs. [Link; soft paywall]

Global food crisis looms as fertilizer supplies dwindle by Joel K. Bourne, Jr. (National Geographic)

War, sanctions, weather, and export restrictions have fueled an evaporation of global fertilizer supply that is adding new cost pressures to agricultural commodities amidst a global food shortage. [Link]

The Average Age of Vehicles on U.S. Roadways Hits a Record 12.2 Years by Nora Eckert (WSJ)

With car sales beaten down by semiconductors shortages and ever-longer lifetimes for modern vehicles, the average age of US cars continues to grind higher. [Link; paywall]

Real Estate

Paradise Burned to the Ground. Now It’s Another Hot Housing Market by Aaron Gordon (Vice)

After a California town burned to the ground in 2018, residents feared they would never be able to rebuild. But the COVID housing market has flipped the script and new residents are piling in to buy up every property in sight, regardless of the fire risk. [Link]

All My Apes Gone

They spent a fortune on pictures of apes and cats. Do they regret it? by Pranshu Verma (WaPo)

The NFT market has taken a serious leg lower, with a big decline in both prices and volumes amidst a re-think of one of the most over-the-top speculative markets on record. [Link; soft paywall]

Someone Stole Seth Green’s Bored Ape, Which Was Supposed To Star In His New Show by Sarah Emerson (BuzzFeed)

An NFT was set to star in a new show produced by actor Seth Green, but the Bored Ape token was stolen recently and with it the commercial rights required to produce the show. [Link]

Portfolios

Investors Dare to Dip Back Into Bonds by Matt Wirz (WSJ)

With stocks pounded this year, investors are desperate for stability and are seeking it in good old fashioned bonds despite soaring yields year-to-date. [Link; paywall]

The Stock Market’s Drop Is Hitting Many 401(k)s Harder This Time by Anne Tergesen (WSJ)

While target date funds are designed to reduce exposure to equity markets as they approach a hypothetical retirement date, they retain large exposures to stocks…something that investors may not have been aware of or prepared for during the recent stock drop. [Link; paywall]

Demographics

Fragile Job Gains for Black Workers at Stake in Inflation Fight by Matthew Boesler, Jonnelle Marte, and Catarina Saraiva (Bloomberg)

The share of the Black population between 25 and 54 years old who are currently employed hit a 22 year high in April, with the gap in that measure between Black and white Americans at the lowest levels on record. But the FOMC’s focus on inflation may derail all that progress. [Link; soft paywall]

U.S. Births Increase for First Time Since 2014 by Janet Adamy and Anthony DeBarros (WSJ)

After a collapse during the first year of the pandemic, US births rose for the first time since 2014. In the background, births among teenagers (15-19) hit the lowest levels on record and have almost fallen below the 40-44 bracket. [Link; paywall]

Space

Here’s How NASA Plans to Keep the Power on for a Future Moon Base by Kelsey D. Atherton (The Daily Beast)

Long-term lunar habitation is going to require power, and NASA is designing a trio of micro-grids that will sustain the habitat, power mining operations, and support materials processing; there’s also a detailed discussion of lunar sovereignty concerns in this story among other tidbits. [Link]

End of An Era

New York City Removes Last Public Pay Phone in End of an Era by Ginger Adam Otis (WSJ)

The last of NYC’s public street payphones was removed from 7^th between 49^th and 50^th this week, headed to the Museum of the City of New York. [Link; paywall]

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Have a great weekend!

Spring is meant to be a season of growth, but that’s the last way to describe what’s been going on in financial markets for the last several weeks.   The S&P 500 came into April with a three-week winning streak on Friday, April 1st, but in what has been one of the cruelest April Fools pranks we’ve ever seen, the S&P 500 was down for seven straight weeks in what was the longest weekly losing streak since March 2001.  For the DJIA, the streak was even more extreme with eight straight weekly declines for the longest run of consecutive declines in 99 years. 99 years is a long time.

As shown in the chart below, the streak that ended this week was one of just three other periods where the S&P 500 was down for seven or more straight weeks.  The other three were in May 1970 (8 weeks), March 1980 (7 weeks), and March 2001 (8 weeks).  Besides relentless selling over several weeks, the other factor these three periods have in common is that they all occurred during recessions.  May 1970 was right in the middle of a recession, March 1980 was two months into the first of the ‘double-dip’ recessions in the early 1980s, and March 2001 came just as the economy was starting to roll over from the dot-bomb fueled contraction.  Economists have assured anyone who will listen that the economy isn’t close to a recession yet, but then again, in Q1 the economy contracted by 1.5%, and the latest projection from the Atlanta Fed’s GDPNow model currently has a forecast of just 1.9% growth for Q2.

As an investor, whether we’re in a recession or not at this point is almost irrelevant.  Equities have already fallen sharply. The more important question is where the economy is going.  Anyone who has that kind of crystal ball has a distinct advantage.  Think about it.  When a recession begins, no one watching just the economy ever knows what is about to unfold.  They may be thought of as periods of economic weakness and high unemployment, but the start of a recession also coincides with the point at which the economy is at its strongest and firing on all cylinders.  The last thing on anyone’s mind at that point is a recession.

In terms of the prior streaks where the S&P 500 declined for seven or more weeks in a row, forward performance was mixed but generally positive.  Three is admittedly a small sample size, but one, three, six, and twelve months later, the S&P 500 was higher at least two out of three times, and three months later (13 weeks) it was higher all three times.  2022 has been a lousy year so far.  Wouldn’t it be nice, though, if six months from now at Thanksgiving, instead of everyone worrying about a new emerging strain of COVID (like we did last year), we were all thankful that stocks and bonds stabilized and maybe, just maybe, even partly dug themselves out of the hole they’ve already put themselves into? Click here to learn more about Bespoke’s premium stock market research service.

In spite of the S&P 500 actually reversing course and heading higher in the past week, sentiment on the part of individual investors surveyed by the American Association of Individual Investors has turned lower, once again falling below 20%. That is the first sub-20% reading since the last week of April, although the multiple readings in the mid-teens last month were lower than this week’s reading.

The past several months as the major indices have entered downtrends have seen an impressive collapse in optimism.  Over the past six months, slightly more than half of the time less than a quarter of AAII respondents have reported as bullish. Going back through the history of the survey beginning in the late 1980s, there have only been two other periods with this same sort of consistently pessimistic attitude for an extended period of time: late 1988 to early 1989 and two years later in early 1991.

Given bulls were hard to find, bearish sentiment ticked up to 53.5%. Although over half of respondents are expecting lower stock prices, that is still not as high of a reading as the end of April when it was nearly 60%.

Regardless, bears continue to heavily outweigh bulls as the bull-bear spread has now sat in negative territory for all but two weeks over the past half-year.

The bearish camp did not pick up all of the losses in bullish sentiment.  Neutral sentiment rose back up to 26.7% this week marking the highest reading in a month. That being said, the reading remains below the historical average of 31.43%.  Click here to learn more about Bespoke’s premium stock market research service.