Given their ubiquity in just about every aspect of our lives, the performance of semiconductor stocks provides a great barometer for the health of the economy.  Therefore, yesterday’s new high in the VanEck Semiconductor ETF (SMH) was an encouraging sign for the broader economy.

While prices, on an absolute basis, are at new highs, semiconductors haven’t been nearly as strong relative to the performance of the broader market.  The chart below shows the relative strength of SMH versus the S&P 500 ETF (SPY) over the last 12 months where a rising line indicates outperformance on the part of the semis and a falling line indicates underperformance.  After closing out 2020 on a strong note and continuing that strength right up through the first two months of the year, semiconductors had a rough three months on a relative basis through May and have been moving pretty much in line with the S&P 500 ever since.  One notable aspect of the sector’s relative strength has been that despite the new high in the broader market, the relative strength of semis is not only well off its high from earlier in the year, but still hasn’t even surpassed the recent peak levels from early August and early September.  A move above those levels would be a positive development for the group.

The table below lists the holdings of SMH and shows each one’s performance YTD and over the last five trading days, as well as where they closed on Tuesday relative to their 50-day moving averages (DMA).  On the right side of the table, we also show where each stock is currently trading relative to its trading range. Whether you look at the performance of individual stocks on a YTD basis or where they are trading relative to their trading ranges, there hasn’t been a strong degree of uniformity in the group.  On a YTD basis, returns for stocks in the ETF range from a gain of 102% for NVIDIA (NVDA) to a decline of over 20% for Universal Display (OLED).  Furthermore, just 12 of the 25 companies listed below have outperformed the S&P 500 YTD.  On a more short-term basis, performance has been just as uneven with ten stocks up over 5%, 12 stocks up less than 5%, and three stocks that are down. Click here to view Bespoke’s premium membership options.

FBI background checks for the purchase of firearms continued their record streak of month/month (m/m) declines in October, falling from 2.626 million down to 2.593 million.  Over the course of just seven months now, background checks have dropped by just over 2 million, or 44.8%, but even after that historic decline, total background checks remain above the upward trend they maintained in the 10+ years preceding COVID.  While not typically viewed as a gauge of sentiment, one could make the argument that the steep declines in background searches required for gun purchases signals that levels of uncertainty on the part of Americans have been easing.  After all, you’re probably less likely to go out and buy a gun when you’re feeling safe and secure!

On a y/y basis, total background checks are down just over 20% and near their lowest levels since early 2014.  Similar to the period leading up to the current decline, total background checks during that period followed what had been a record y/y surge after President Obama was elected to a second term.

As mentioned above, claims have now declined on a m/m basis for seven straight months.  Over the last 20+ years, this is now the longest streak of monthly declines, surpassing the prior record of six months from June 2013.

With the pace of background checks crashing back down to earth in the last several months, you would expect to see the stocks of gun manufacturers struggling, and to a degree, you’d be right.  Both Sturm Ruger (RGR) and Smith and Wesson (SWCI) are well off their highs from the middle of the year, but they’re also not trading near 52-week lows either.  RGR continues to trade above support despite looking like it’s starting to roll over at a lower high.  SWBI briefly surged close to $40 in early July before quickly reversing, and while the stock hasn’t participated in the recent market rally, the pace of decline has certainly slowed.  Click here to view Bespoke’s premium membership options.

Please click the image below to view our November 2021 market calendar.  This calendar includes the S&P 500’s average percentage change and average intraday chart pattern for each trading day during the upcoming month.  It also includes market holidays and options expiration dates plus the dates of key economic indicator releases.  Start a two-week free trial to one of Bespoke’s three research levels.

The S&P 500 capped off the month of October with further gains and more record highs. The month of October saw the S&P 500 rise 6.91%. Over the last decade, there have only been six months with as large of gains as October 2021.  November of last year was the last of those months when the index rose 10.75%.

Going back through the history of the index, there have been 166 months on record in which the S&P 500 has rallied at least 5% during the month.  On average, the first day of the following month has tended to outperform the first day of all months by 8 bps with positive performance 55.4% of the time.  Similarly, the performance of the index over the whole next month has also tended towards outperformance with an average gain of 0.87% (positive performance 65.1%  of the time) versus 0.64% for all months.  Click here to view Bespoke’s premium membership options.

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!

Climate

Unlimited Sand and Money Still Won’t Save the Hamptons by Polly Mosendz and Eric Roston (Bloomberg)

How the federal government is investing billions to give some of the most expensive coastal real estate in the world a chance at survival amidst rising seas and intensifying storms. [Link]

The Engineer Who Made Electric Vehicles Palatable for the Pickup-Truck Set by Alejandro De La Garza (Time)

A profile of the veteran Ford engineer who is driving the company towards widespread battery-electric adoption that will be predicated on selling millions of electric pickups she helped design. [Link]

Economic Research

Labour markets and inflation in the wake of the pandemic by Frederic Boissay, Emanuel Kohlscheen, Richhild Moessner and Daniel Rees (BIS Bulletin)

A helpful cross-country analysis of the very different labor market shifts brought on by the pandemic. The US saw an unusual uptick in average hours worked but much more unemployment, while other developed markets typically reduced labor activity via fewer hours. [Link; 9 page PDF]

A C-Shaped Recovery? by JW Mason (JW Mason)

Unlike in a typical recession, a massive policy response meant that real incomes actually rose during this recession, and the biggest gains came at the bottom of the income distribution, a complete mirror image of the typical downturn. [Link]

Monitoring the Inflationary Effects of COVID-19 by Adam Hale Shapiro (FRBSF Economic Letter)

A somewhat dated (from August 2020) but useful analysis of COVID-related inflation and disinflation that uses volume changes to identify which categories of prices are being driven by supply versus demand shifts. [Link]

Strange Pastimes

Crypto Investors Are Bidding to Touch a 1,784-Pound Tungsten Cube Once a Year by Edward Ongweso Jr (Vice)

Just when you thought the NFT craze couldn’t get any weirder, and Illinois company is selling one that allows users to touch a big cube of metal. [Link]

Inside the jaw-clenching world of cricket fighting in China by Emily Feng (NPR)

A thousand year old tradition in China involves setting bugs against one another while a referee watches closely to pick a winner. The little insects are rarely injured by their grappling, and owners never allow fights to the death. [Link]

Tech, For Good Or Bad

For the First Time, Drones Autonomously Attacked Humans. This Is a Turning Point. by Kyle Mizokami (Popular Mechanics)

While somewhat dated, this article is still an important milestone in the evolution of warfare: the first time a drone has made a decision to attack and kill a human without another human being involved. [Link]

3-D Printed Houses Are Sprouting Near Austin as Demand for Homes Grows by Nicole Friedman (WSJ)

New technology is being deployed to help reduce the costs of home construction, with builder Lennar (LEN) hoping to free up more supply with the new approach. [Link; paywall]

You Could Be Competing With Bots to Buy Gifts This Christmas by Joshua Hunt (Bloomberg)

Inside the desperate competition for sneakers sold by retailers that pit botnets versus consumers looking to buy shoes for themselves. [Link; soft paywall]

Oops

Covid cases: Immensa lab failures preceded huge spikes in South West as large number of positives were missed by Thomas Saunders (iNews)

As much as a quarter of the positive COVID tests in South West England were missed thanks to an error at a lab that generated more than 40,000 false negative test results in September and October. [Link]

Demographics

The First Population Bomb by Davis Kedrosky (Substack)

How a massive surge in population preceded the fastest economic growth of England’s industrial revolution, driven by a range of factors from earlier marriages (thanks to better labor incomes) to longer life expectancy. [Link]

Cigarette Sales Rose in 2020 for First Time in 20 Years by Talal Ansari (WSJ)

With less money spent on travel, gas, and entertainment, more money got spent on cigarettes, driving the first annual increase in cigarette volumes for more than two decades. [Link; paywall]

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Have a great weekend!