It may have been a shortened session in the US, but equities took a big hit around the globe today. In the matrix below, we show the ETFs of the 23 countries in our Global Macro Dashboard.  As shown, there was only one ETF that was down less than one percent today: Switzerland (EWL). After that decline, it is now one of only two other countries that are currently above their 50-DMAs: the S&P 500 (SPY) in the US and Taiwan (EWT).  With that said, both of those countries have pulled back dramatically.  Alongside Brazil (EWZ), those two countries are also the only ETFs of this screen that are still in the green for the month of November.  As could be expected, the title of the worst performer with a 6% decline today belongs to ground zero of this new strain of COVID: South Africa (EZA). As a result, it is now at ‘off the chart’ oversold levels trading 3.62 standard deviations below its 50-DMA.  Although they are not as oversold as South Africa, Spain (EWP) and India (INDA) are also more than 3 standard deviations below their 50-DMAs. Meanwhile, Mexico (EWW) is the most oversold country ETF trading almost 4 standard deviations below its 50-DMA.

The drop in South Africa equities has been dramatic, but that is also in the context of what has already been a downtrend over the past few months. Tacking on today’s declines, EZA is now almost flat over the past year.

Steep declines have also resulted in technical breakdowns of multiple other countries like Germany (EGW) and Japan (EWJ).  Other European countries like France (EWQ), Italy (EWI), and the UK (EWU) may not have broken below support, but they are at the low end of their recent ranges. As for Canada (EWC) and the United States (SPY), the pullbacks are notable but not as much of a negative following strong gains this fall. Click here to view Bespoke’s premium membership options.

Like just about all other risk assets this week, it’s been a rough one for bitcoin.  As of Friday morning, the world’s largest cryptocurrency was trading down over 7% to the low $54K range.  After taking out its spring highs in late October and then making a higher high in November, bitcoin has seen a sharp and swift pullback in the last few weeks falling nearly 20%.  Even after the current pullback, the uptrend from the summer lows for bitcoin remains intact as a break of that trendline wouldn’t come into play until around the $50K level.

As anyone even paying some attention already knows, volatility is no stranger to bitcoin.  While the current pullback is nearing the 20% threshold, in the last year alone, bitcoin has seen a number of pullbacks from record highs of similar or even greater magnitude.  As shown in the chart below, if the current pullback reaches the 20% threshold, it would be the fourth pullback of that magnitude or more from a record high in the last twelve months. Of those three prior pullbacks, the first two bottomed out at declines of less than 25%, but the most recent was much deeper as bitcoin was more than cut in half from its April closing high to its July closing low.  Click here to view Bespoke’s premium membership options.

Out of the massive slug of economic data this morning, one major bright spot was jobless claims.  It has now been 88 weeks since the March 13, 2020 release; the last one before claims began to print in the millions.  In that time, claims have fallen to not only take out pre-pandemic levels and the low prior to that of 203K set in April 2019 but today saw the first sub-200K reading since November 20, 1969. That compares to estimates of a reading of 260K and last week’s 2K upward revised number of 270K. On a side note, in 2019 there were three weeks where the initial release of initial claims came in below 200K (1/24, 4/11, and 4/18), but they have been since revised higher.

While that is a significant low in claims, the drop appears to a large degree to be thanks to seasonal adjustment.  On a non-seasonally adjusted basis, claims rose to 258.6K which was the highest level in six weeks.  It is seasonally normal for claims to head higher during the current week of the year with it having happened over 80% of the time historically.  Additionally, that is a bit of catch-up considering claims have been bucking seasonal trends in recent weeks.

Continuing claims were also lower this week falling from 2.109 million to 2.049 million.  As with initial jobless claims, that sets a new low for the pandemic that is 265K above the level from March 13, 2020.

Factoring in all other programs creates an additional week of lag to the data meaning the most recent print is through the first week of November.  The final week of October’s unusual uptick on account of peculiar growth in claims for expired programs has unwound in the most recent week’s data.  PUA claims were more than cut in half as PEUC claims also fell by 121K. Combined that resulted in a new low of 2.44 million claims. Click here to view Bespoke’s premium membership options.

As we first highlighted yesterday, and the trend is continuing again today, the growth trade is underperforming.  The ARK Innovation ETF (ARKK) and other ETFs in the ARK universe have been proxies of hyper-growth/futuristic trends, and as such, it too has fallen victim to underperformance this week.  As shown below, the ETF peaked on November 1st and has since fallen 16.7% through today with losses accelerating this week.  Today alone, ARKK is down 3.85% which has brought it below support at the March and October lows. While it has set a new low, it would still need to fall another 7.3 percentage points until it reaches the next intraday low set back in mid-May.

On a relative basis, the declines are even starker.  The ratio of ARKK to the S&P 500 (SPY) has been on the decline all year with a particularly sharp collapse this month which has left it at the lowest level since June of last year.  As mentioned above, ARKK peaked right at the start of the month. That means the ratio of ARKK vs SPY also peaked on that day. Month to date, the ratio has now fallen 17.27% which puts it on pace for the greatest degree of underperformance to the S&P 500 since this past March.  The only other month in the ETF’s history with a steeper MTD drop in the ratio at any point of a month was March of last year during the COVID Crash. Click here to view Bespoke’s premium membership options.

The Richmond Fed released their most recent update on the region’s manufacturing sector this morning with the headline index matching expectations falling to 11.  While that indicates a modest deceleration in business activity, the current level is healthy in the 73rd percentile.

Breadth in this month’s report was generally pretty weak with most components falling month over month.  The only three indices that were higher were Shipments, Service Expenditure, and Average Workweek.  A couple of other indices like Local Business Conditions and Number of Employees were unchanged.  Overall, the report showed improvements on the inflation and supply chain front with decelerating demand and employment metrics.

As previously mentioned, Shipments was one of the only indices to move higher in November but even after that improvement, the index is still in the bottom half of its historical range.  The same goes for New Orders which fell 5 points in November.  Meanwhile, supply chains appear to be getting some relief with a decline in Vendor Lead Times that ranks in the bottom 1% of all monthly moves. With that said, the reading remains historically elevated.  That is likely part of the reason there was an improvement in Shipments and Order Backlogs grew at a slower rate.

Even if lead times improve, inventories might be of concern.  The past year has seen historic lows in the indices tracking inventory changes. In November, Finished Good Inventories set another record low and Raw Material Inventories fell and are now only slightly above the July record low.

Vendor Lead Times was not the only index in orbit that has been coming back down to Earth.  Prices Paid and Prices Received were both significantly lower in November with the latter coming off of a record high. Click here to view Bespoke’s premium membership options.

Last Friday when lockdown and COVID news were front and center, we showed how performance was largely reminiscent of the performance during the COVID Crash lasting from 2/19/20 to 3/23/20.  Today, that relationship is largely being flipped back on its head with the three deciles of the worst-performing stocks during the COVID Crash now the top performers in today’s session. All other deciles are also higher to start the week, but to a much more modest degree.

Looking at some other themes of today’s price action, those stocks that were up the least on a year-to-date basis through the end of last week are underperforming with an average gain of only 13 bps.  All other deciles are up around half of one percent or more.

While that relationship is somewhat messy, there is also a clear theme today of value outperformance.  As shown in the second chart below,  the S&P 500 members with the lowest P/S ratios are outperforming today. The first decile of stocks with the lowest price to sales multiples are up 1.82% on average. That compares to the other end of the spectrum where the stocks trading at the highest premium to sales are down 1.14% on average.

Taking a longer-term look at the relationship of value and growth, in the chart below we show the ratio of the Vanguard Growth ETF (VUG) versus the Vanguard Value ETF (VTV).  As shown, the line has been trending higher since the late spring and it even broke out to a new high at the end of last week. The underperformance of growth stocks today is leading that line to fall back below those prior highs.  Click here to view Bespoke’s premium membership options.