Along with just about everything else these days, prices at the pump have been surging this year.  According to AAA, the national average price of a gallon of gas currently stands at $2.88 per gallon.  To find the last time prices were this high, you have to go back to May 2019.  This year alone, gas prices have already increased 27.7%.  The table below compares the change in gas prices so far this year to the same time period in every other year since 2005, while the chart compares the trend in prices this year to a composite pattern of all other years.  At the current price level, gas prices are the highest they have been at this point in the year since 2014, and there have only been five other years where prices were higher.

What really stands out, though, is how fast prices have increased.  Prior to 2021, there wasn’t a single year since 2005 that the national average price increased by more than 20% YTD through 3/17, but this year, they’re already up 27.7%!  Based on the typical seasonal pattern, don’t expect much in the way of relief anytime soon.  Typically, prices at the pump rise right up through Memorial Day and then level off for the summer before easing in the last four months of the year.

The recent rise in gasoline prices has also been incredibly consistent.  It has now been 52 straight days that the national average price has gone without a one-day decline and represents just the fourth streak of 50 or more days since 2005.  The longest streak ended at 76 days in early 2019 (the last time prices approached $3 per gallon) while the only two other streaks were in 2007 and 2009.

With the early stages of the COVID outbreak now a year in the rearview mirror, we’re starting to see some crazy y/y moves in gas prices and these moves are only going to get more extreme as we approach the one-year anniversary of crude oil prices going negative.  The average price of a gallon of gas is up 28.3% versus a year ago which is already the highest y/y pace in four years.  In the weeks ahead, though, this y/y rate is almost guaranteed to increase.  As mentioned above, gas prices typically rise between now and the end of April, and in the 16 years since 2005, there have only been three years where prices declined between now and 4/30. Not only that, but during the period from 3/17 through 4/30 last year, gas prices decline more than 20%.  Therefore, even if prices stay flat between now and 4/30, the y/y increase will surge to 62.8%, which would be just shy of a record y/y pace.  The FOMC may be pulling out all the stops to get inflation higher, but unless you own a gas station, these trends in gas prices are painful.  Start a two-week free trial to Bespoke Institutional for full access to all of our research and market commentary.

The National Association of Home Builder’s measure of homebuilder sentiment fell again in March. Although the index’s 2 point decline down to 82 leaves it 8 points off the November record high, the current level of sentiment is still a few points above the pre-pandemic record high.

A decline in present sales drove that decline as the index fell 3 points from 90 to 87.  As with the headline number, although that is a decline from the peak of 96 in November, the current reading is still above anything recorded prior to the pandemic.  Additionally, considering the indices for Future Sales and Traffic have held up better, that decline in Present Sales does not necessarily point to a broader downturn in demand. Even though Present Sales were lower, the index for Future Sales rose by 3 points recovering the ground lost in February while Buyer Traffic also avoided a decline as that index went unchanged from February. Again rather than a broader deterioration of conditions, the decline in Present Sales could be a result of issues like rising prices of things like lumber and higher mortgage rates which in turn means overall higher costs of a new home.

The South was the only region to avoid a decline in March.  That index held steady at 82 for the third month in a row. The Northeast also fared a bit better than the other regions as the index only fell one point from last month’s level that was tied with October for a record high. The Midwest and the West fell more sharply with each index dropping 3 points.  Regardless of those declines, both indices continue to come in at historically strong levels.

With the weaker headline release providing a bit of a headwind in terms of catalysts, the iShares Home Construction ETF (ITB) is fighting to break out and hold above its early February highs today.  Last week it unsuccessfully tried to take out resistance, but still remains right below its prior highs.

Looking across S&P 1500 homebuilder stocks, there are two in our Trend Analyzer tool that currently earn “good” timing scores: TopBuild (BLD) and NVR (NVR). Whereas the broader group is testing 52-week highs, BLD and NVR are some of the few that are not currently overbought having recently pulled back a bit.  After taking a brief dip below its 50-DMA late last month, BLD has been fluctuating around its moving average over the past few days. NVR on the other hand was unsuccessful in breaking out last week which was followed by a successful bounce off of its 50-DMA yesterday.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

This morning the New York Fed released its monthly reading on the region’s manufacturing sector.  The headline index was expected to move up to 15 from February’s reading of 12.1. Instead, the increase was even larger as the index rose 5.3 points to 17.4.  In addition to that being the ninth consecutive month that the region’s manufacturing sector expanded, it also surpassed the summer high of 17.2 making for the strongest reading since November 2018.

In addition to the headline number moving higher, every other indicator also continues to show expansionary readings painting a broadly positive picture for the region’s manufacturers.  The only indices to show any deceleration in March were those for New Orders and Number of Employees.  Six-month expectations also remain positive, although there were more of these that were lower on a month-over-month basis.

As previously mentioned, New Orders was one of just two areas in the report to experience a deceleration in March.  Falling to 9.1, this month’s reading sits in the middle of its historical range still consistent with a seventh straight month of growth in new orders.  Other related indicators remain much stronger though.

With orders still growing, the index for Unfilled Orders expanded for a second month in a row climbing to the highest level since February of last year.  Shipments picked up even more significantly.  The index rose 17.1 points to 21.1. That is the ninth-largest month-over-month increase since the start of the survey in 2001.  The most recent moves of similar or larger size were 29.1 and 42.3 point increases in May and June, respectively, of last year. As with the headline number, that is now the highest level since November 2018. Although shipments are accelerating, Delivery Times were also higher.  That index now sits in the top 3% of readings

In spite of those long lead times and high demand, inventories are rising with that index gaining 1.6 points to the highest level in just over a year. Like delivery times, that stands in the top decile of readings.  Looking to the future, responding firms broadly expect higher inventory levels six months down the road.  That index climbed 4.6 points to 19.5 which is the second-highest reading on record behind a print of 20.3 in January 2018.

Another area of the report that continues to come in notably high is prices. Generally speaking, price increases and expectations for price increases are being reported at one of the highest clips of the past decade. Both indices for Prices Paid and Received currently are in the top 3% of all readings.  Starting with a look at Prices Paid, March marked the eighth month in a row that the index rose month-over-month as it has reached the highest level since May of 2011.  Similarly, expectations came in at the highest level in nine years. While Prices Received have only risen three months in a row, it is also at the highest level since May of 2011 and expectations are at the highest level since April of 2011.

While current and future indices are moving in sync with one another with regards to prices, those for employment moved in opposite directions.  The index for Number of Employees was still consistent with further employment gains in March, but the index fell to the lowest level since November.  While hiring growth decelerated, responding firms are much more optimistic when it comes to employment six months down the road.  That index climbed 14.8 points to 31.4. That was the fourth-largest uptick on record. The only larger one-month moves were in March 2008 (+22.8 to 31.9), October 2001 (+20.5 to 12.3), and September 2004 (+16.1 to 29.2).  The index is now at the highest level since June 2010.

As for Average Workweek, things were a bit more modest with the current conditions index rising to the highest level since October. Again, the index for expectations was even stronger rising to a two-year high. 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.

While you’re here, join Bespoke Premium with a 30-day free trial!

Cars

Standstill Traffic May Be the Only Thing Keeping Crash Deaths From Skyrocketing by Alissa Walker (Curbed)

Despite a pandemic-fueled collapse in the number of vehicle miles travelled, traffic deaths soared in 2020 as clear roads meant higher speeds and more death. [Link]

We Called 8 Dealerships Asking About EVs. Here’s What They Told Us by Adam Ismail (Jalopnik)

Whether or not dealerships embrace electric vehicles will be a key to how fast they roll out in the United States, and the early indication from this informal review of dealerships across the country. [Link]

Speculation

Young retail investors plan to spend almost half of their stimulus checks on stocks, Deutsche survey claims by Holly Ellyatt (CNBC)

A survey of retail investors suggest that the latest round of stimulus checks are in large part destined for the equity market, driven mostly by younger stock buyers. [Link]

The most frequently asked questions by Robinhood traders reveal ‘new type of uninformed equity-market participant’ by Andrew Keshner (MarketWatch)

During Robinhood platform outages, stocks that were widely owned by Robinhood traders became more liquid and less volatile, suggesting that high volume free to trade buyers and sellers on the platform are adding noise to market prices. [Link]

SPAC Pioneers Reap the Rewards After Waiting Nearly 30 Years by Amrith Ramkumar (WSJ)

Blank check companies were first introduced in 1993 but didn’t really catch on until the last few years; they’re now 70% of IPOs and have raised $75bn this year alone. [Link; paywall]

NFTs

The Whales of NBA Top Shot Made a Fortune Buying LeBron Highlights by Ben Cohen (WSJ)

Digital trading cards known as non-fungible tokens have proven to be a spectacular speculation, with unique clips (which are of course widely available on YouTube or other sites) trading for millions of dollars. [Link; paywall]

Why the NFT Craze Is a Bubble Waiting to Pop by James Surowiecki (Marker)

Unique digital assets are the latest mania fueled by blockchain technology and rabid speculator enthusiasm for the next big thing. [Link]

Tech

This Chip for AI Works Using Light, Not Electrons by Will Knight (Wired)

Instead of running electrons through transistors, a startup that got its beginnings at MIT is using light to build chips that have radically higher throughput potential…if they work. [Link; soft paywall]

Tesla Is Plugging a Secret Mega-Battery Into the Texas Grid by Dana Hull and Naureen Malik (Yahoo! Finance/Bloomberg)

A subsidiary of the electric vehicle company is developing a battery near Houston that can store 100 megawatts, enough to power 20,000 homes on a hot day in Texas. [Link]

POLITICO Playbook: Scoop: Biden taps another Big Tech trustbuster by Ryan Lizza, Tarra Palmeri, Eugene Daniels, and Rachael Bade (Politico)

The Biden Administration has made multiple appointments that suggest a tight focus on antitrust in the tech industry, with a White House economic advisor and a Federal Trade Commission member both falling inside that category. [Link]

Weird News

The bizarre tale of the world’s last lost tourist, who thought Maine was San Francisco by Andrew Chamings (SFGate)

Back in 1977, a German tourist got confused on a layover and mistook Bangor, Maine for San Francisco, sparking an international media frenzy over a very confused man who spoke no English. [Link]

Brood X cicadas are about to put on one of the wildest shows in nature. And D.C. is the main stage. by Darryl Fears (WaPo)

The Delaware Valley, central Midwest, Hamptons, and eastern Tennessee are all due to receive an unholy storm of cicadas this summer as Brood X emerges from its long slumber. [Link; soft paywall]

Tax Trouble

He Got $300,000 From Credit-Card Rewards. The IRS Said It Was Taxable Income. by Richard Rubin (WSJ)

A physicist who spent $6.4mm on gift cards which he rolled into money orders deposited to his bank. The transactions were so large and numerous that they were flagged by the Treasury Department, eventually leading to an IRS investigation. [Link; paywall]

Food & Drink

Union officials: Tate’s Bake Shop workers threatened with deportation if they unionize (Long Island News 12)

Undocumented workers for Long Island bakery Tate’s are being threatened with deportation in response to a unionization drive. Tate’s is owned by Mondelez. [Link; auto-playing video]

The True Cost of a Cocktail by John Debary (Punch)

Ever wonder why a drink at a cocktail bar hits your wallet so hard? A breakdown of the costs that a cocktail typically embeds in its high menu price. [Link]

Furniture

Booming furniture sales mean ‘unprecedented’ delays for sofas and desks by Abha Bhattarai (WaPo)

Huge demand for furniture to upgrade homes that Americans are spending far more time in than usual is driving an unprecedented disruption to supply chains. [Link; soft paywall]

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Have a great weekend!

Last night the Federal Reserve updated its quarterly Flow of Funds (Z.1) report for Q4. The quarterly report measures income, savings, assets, and liabilities of various macroeconomic sectors. Looking at households specifically, we can measure aggregate exposure to stocks by looking at their holdings of equity investments relative to other assets. We note that this does not include mutual fund shares but it does include ETFs, closed-end funds, and REITs.

As shown below, the value of equity market assets held by households is up to 16.8/% of total assets, the highest since Q3 of 1969 and surpassing the 16.7% peak from the tech bubble. Looking at financial assets only, equity exposure is the highest since the 24.2% peak from 2000, but is nonetheless extremely elevated. We should note that while this signal is certainly a contrarian indicator, it doesn’t necessarily mean that equity markets must decline in value; there’s no reason that markets can’t continue to climb and raise the share of equity ownership further.

Things look different when we include household holdings of mutual funds and other exposure to equities. In the chart below we account for indirect allocations to equities. By this measure, Q4 equity market exposure rose to 38.0% of financial assets (versus the Q1 2000 peak of 38.3%). Equity exposure as a percentage of all financial assets hit a record, surpassing the old peak of 26.4% with a 27.0% reading in Q4. In short, households are very aggressively exposed to equity markets.  This blog post is adapted from an analysis included in our nightly Closer report.  Click here to start a free trial of Bespoke Institutional to get immediate access.