We’ve heard a lot lately about the steadiness of the S&P 500’s rally over the last year.  And steady it has been.  As shown below, it has now been 307 calendar days since the S&P 500’s last 5%+ pullback.  Over this time period, the index has rallied 38.75%.

While 307 days without a 5%+ drop may seem like a long time, we actually just experienced a streak that was nearly twice as long from mid-2016 through early 2018.  As shown below, that streak from 6/27/16 through 1/26/18 lasted 578 calendar days and saw the S&P gain 43.6%.

There have been three other streaks of 500+ days without a 5%+ decline in the S&P’s history.  The longest streak lasted 593 days from December 1957 through August 1959.  During that time period, the S&P rallied 54.16%.  The other two 500+ day streaks ran from November 1963 to May 1965 (538 days) and December 1994 to May 1996 (533 days).

The current streak of 307 days without a 5%+ pullback ranks as the 13th longest on record.  It has been a good run, but it’s certainly not unprecedented either.  Click here to view Bespoke’s premium membership options.

September has historically been a weak time of year for the stock market, but with the growing popularity of crypto-currencies, we wondered what the seasonal trends have historically been for bitcoin.  The chart below shows a composite of bitcoin’s median YTD performance over the last ten years for every day of the year.  Generally speaking, bitcoin has started off the year slowly.  Based on the last ten years, its median performance during the first quarter of the year has basically been flat but then starts to accelerate to the upside in Q2.  Strength has generally continued in the first half of Q3, but then the period from mid-August through mid-October has been the weakest time of the year when bitcoin’s median YTD change falls from over 120% to below 85%.  While Q4 has historically tended to start off slow, the year has typically finished on a high note with steady gains from late October through year-end.

In terms of consistency, the chart below shows the percentage of time from every calendar day of the year that bitcoin has experienced positive returns over the following month (four weeks).  Historically speaking, from 2011 through 2020, bitcoin experienced positive one-month forward returns the most frequently right around tax day as it traded higher from 4/14 over the following four weeks in all ten years.  As for the current period of the year (second red dot in the chart), in the four-week period following 9/8, bitcoin has had positive returns 60% of the time.

Whenever we discuss market seasonality, we always stress that historical patterns should only be used as a guide.  Just because something happened one way in the past doesn’t mean it will follow the same pattern in the future.  Along these lines, bitcoin’s performance in 2021 is a perfect example of not following the historical pattern.  The chart below is the same as the one above, but it also includes bitcoin’s performance so far in 2021.  Compared to the historical pattern, bitcoin’s performance in much of 2021 has been nearly the exact opposite.  Rather than starting off the year flat, bitcoin came out of the gate strong in 2021 and more than doubled before the end of Q1.  Beginning in mid-April, when bitcoin has historically seen the highest consistency of positive returns over the next month, its price peaked and quickly gave up most of its YTD gains.  In mid-July, bitcoin’s price finally bottomed out and started to rally right up through Labor Day weekend when it briefly traded above 50K before falling over 10%.  If there’s ever a time of year when bitcoin bulls don’t want bitcoin to follow the seasonal script, it’s the next few weeks.  Click here to view Bespoke’s premium membership options.

With a federal holiday yesterday and nothing on the docket today, our Economic Monitors are unusually light the first half of this week. While there is nothing that would have an impact so far this week, the Citi Economic Surprise Index for the US is reaching the lowest levels since May of last year, shortly after the index hit record lows as economic data saw drastic impacts from the onset of COVID.  These surprise indices represent how economic data is coming in relative to expectations. Lower/negative readings indicate economic data is coming in worse than expected and vice versa for higher readings.

Last year saw record lows in the index which were followed by record highs that far surpassed any level with historical precedence. Since the peak in July 2020, the Surprise index has not only moderated but turned negative. The US is now at the lowest level in over a year and in the eighth percentile of its historical range.  While it has yet to find a bottom, this negative of a reading won’t last forever.  The economists providing estimates will eventually catch up to the downside, and they usually overshoot, which will allow for the surprise index to bottom and start heading higher again.  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!

Technology

What the Metaverse is and why it matters to you by Andy Serwer with Max Zahn (Yahoo! Finance)

The hottest trend in Silicon Valley is an immersive series of platforms, experiences, and spaces that deepen the human experience beyond the physical world into untold layers of code. [Link]

The Silent Partner Cleaning Up Facebook for $500 Million a Year by Adam Satariano and Mike Isaac (NYT)

Accenture is widely known as a stodgy and quotidian consulting firm. It also sits at the center of a massive effort to make Facebook a tolerable place to spend time, at an equally massive human cost. [Link; paywall]

Leveraging Brands against Disinformation by Steph Hill (SSRC)

Social media and intensification of brands into value statements have created a two-way dialogue and placed non-political actors right into the middle of major efforts to shift society. [Link]

Afghanistan

Taliban Move to Ban Opium Production in Afghanistan by Sune Engel Rasmussen, Zamir Saar and James Marson (WSJ)

The lynchpin of the Afghan economy is being removed by its new rulers, which given the massive balance of payments crisis the company is going through may prove totally unsustainable. [Link; paywall]

Studies

J&J’s HIV Vaccine fails phase 2b, extending long wait for an effective jab by Nick Paul Taylor (Fierce Biotech)

Johnson & Johnson announced that its Stage 2 trial of an HIV vaccine did not demonstrate sufficient efficacy to continue trials in a setback for vaccines after a banner year. [Link]

The Impact of Mask Distribution and Promotion on Mask Uptake and COVID-19 in Bangladesh by Jason Abaluck et al (Innovations for Poverty Action)

A massive randomized control trial gives concrete and scientific evidence what had been strongly suggested by lower-level analysis: that masks, especially surgical masks, make a large difference in slowing transmission of COVID. [Link]

Regulation

McDonald’s McFlurry Machine Is Broken (Again). Now the FTC Is On It. By Heather Haddon (WSJ)

The Federal Trade Commission has reached out to McDonald’s franchisees in an inquiry related to the constant state of disrepair franchisees and the chain keep their machines in resulting in frequent breakdowns. [Link; paywall]

China Sets New Rules for Youth: No More Videogames During the School Week by Keith Zhai (WSJ)

After cracking down on for-profit education companies earlier this summer, Chinese authorities are now coming after students, setting rules for videogame time. [Link; paywall]

James Simons, Robert Mercer, Others at Renaissance to Pay Up to $7 Billion to Settle Tax Probe by Gregory Zuckerman and Richard Rubin (WSJ)

An inquiry into the treatment of investments as long-term capital gains as opposed to short-term capital gains (and therefore a massively reduced tax burden) has led to a massive $7bn settlement between investors in one of the . [Link; paywall]

Labor Markets

Need to Call and Airline? Your Hold Time Will Be Approximately One Zillion Hours by Allison Pohle and Krystal Hur (WSJ)

With massive demand and complex local regulations, airlines are struggling to accommodate high call volumes that are being further hindered by under-staffed call centers. [Link; paywall]

Amazon’s Answer to Delivery Driver Shortage: Recruit Pot Smokers by Spencer Soper (Yahoo! Finance)

With a complete lack of available labor for delivery trucks, Amazon is experimenting by featuring a lack of marijuana testing in its recruiting materials, part of an effort to reach into every crack of the workforce for potential candidates. [Link]

Ben Dugan Works for CVS. His Job Is Battling a $45 Billion Crime Spree by Rebecca Ballhaus and Shalini Ramachandran (WSJ)

Physical retail is facing a different kind of online competition: thieves are ripping off stores in order to sell goods online via platforms like Amazon or EBay. [Link; paywall]

Weird News

This company sold a copy of ‘Super Mario Bros.’ for $2 million. NFTs and a Triceratops skull could be next by Tom Huddleston Jr. (CNBC)

Video games are collectors items just like baseball cards: their rarity is the source of much of their value, and the values can get extraordinarily high when prestige buyers step up to the plate. [Link]

Coronal Ejections

A bad solar storm could cause an “Internet apocalypse” by Lily Hay Newman (ARS Technica)

A coronal mass ejection or solar storm could wreck havoc on electrical and electronic infrastructure that serves as the backbone of local and global commerce and industry, as well as badly damaging electrical grids. [Link]

Duration and extent of the great auroral storm of 1859 by James L. Green and Scott Boardsen (NCBI)

Just before the Civil War, a massive ejection of material from the sun drove an electromagnetic storm of epic proportions which knocked out massive swathes of telegraph infrastructure; a similar event today would have much further-reaching implications. [Link]

Indices

GameStop Stock’s Possible Return to S&P 500 in Hands of Anonymous Committee by Akane Otani (WSJ)

While the S&P 500 is widely used as a “passive” index, inclusion is largely dictated by human judgement rather than strict quantitative criteria that other indices tend to use. [Link; paywall]

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Have a great weekend!

This week we launched a new weekly crypto sentiment survey to track sentiment towards the space.  There are already plenty of stock market sentiment surveys, but sentiment survey data in the crypto space — bitcoin, ethereum, NFTs, etc. — is few and far between.

The new survey will be sent weekly to our Think BIG mailing list that has thousands of potential survey participants that have an interest in financial markets simply based on the fact that they joined our mailing list by visiting our website.  We will collect responses from Tuesday through Thursday each week and publish the results on Fridays.

In the survey, we ask whether the participant is “bullish or bearish” on seven things over the next 12 months — 1) the entire crypto space, 2) bitcoin, 3) ethereum, 4) NFTs, 5) the S&P 500, 6), US Tech stocks, and 7) Chinese equities.  While we are mainly focused on collecting sentiment towards the crypto space, we thought including sentiment on equities was beneficial so that we could easily compare the two over time.

Below are the results from the first run of our new weekly survey.  Participants are actually most bullish on US Tech stocks out of this group with a bull/bear spread of +51.3%.  The S&P 500 also leaned heavily bullish with only 5.8% of respondents saying they were bearish over the next 12 months.

Sentiment towards the entire crypto sector leans bullish with bulls coming in at 56.6% and bears coming in at 18.9%.  The bull/bear spread for bitcoin was +23.8 ppts, while the bull/bear spread for ethereum was considerably higher at +47.1 ppts.  Notably, participants are much less bullish on the NFT space with just 22.1% bulls and 36.9% bears.  Chinese stocks also saw bulls and bears come in exactly equal at 37.4% each.  If you’d like to help us measure crypto sentiment going forward, you can join our Think BIG mailing list and take the survey starting next week.  Click here to view Bespoke’s premium membership options.

If you’re planning to drive anywhere this weekend, you may need a wheelbarrow to carry the cash you’re going to need to fill up.  According to AAA, based on the national average, a gallon of gas will set you back $3.184.   Around the country, though, prices vary widely.  In California, where prices are the highest (even higher than Hawaii), the average price of a gallon of gas is $4.40 ($4.71) if you fill up with premium).  Mississippi wins the title of lowest average price at just $2.79 per gallon and is one of just 15 states where you can still get a gallon of gas for less than $3. While prices may be high heading into Labor Day weekend, the fact that it still costs less than 13 cents to drive a mile isn’t all that bad (based on the average fuel efficiency of 24.9 miles per gallon), and it’s much cheaper than most other areas of the world.

That being said, prices at the pump are still high whether you look at things from an absolute or relative basis.  For the current day of the year, the national average of $3.18 is higher than at this point in any other year since 2014, and forty cents above the median level for this time of year.  On a YTD basis, going back to 2005, this year’s increase is the third largest of any other years besides 2009 and 2005.  At 41.3%, prices are up by more than double their average YTD increase through 9/3.

On a y/y basis, average gas prices are also up over 40%.  For just about any other time that rate of increase would be extreme, but given the y/y increase just hit a record high of 63.98% in May it doesn’t seem that bad.

Now that we’ve established that gas prices are high, it is worth pointing out that despite the high levels, prices have loosely followed the seasonal trend.  The chart below compares gas prices this year to a composite of the average YTD increase for every day of the year going back to 2005.  Through the end of May, prices were already up 35% YTD, and in the three months since then, prices have still increased, but at a much slower pace.  Historically, prices tend to rise through Memorial Day and then level off through Labor Day before steadily declining to close out the year.  Like the annual composite, prices dipped into the end of August this year and have spiked into Labor Day weekend.  With respect to this year, increases have been exaggerated due to Hurricane Ida, but if history is any guide, drivers should start to see some relief in the final four months of the year. Click here to view Bespoke’s premium membership options.

The monthly S&P/Case-Shiller home price numbers for June were published earlier this week and showed a continued surge in home prices.  As shown below, 12 of 20 cities tracked saw month-over-month gains of more than 2%, while Phoenix, Las Vegas, Tampa, and Dallas saw MoM gains of 3%+.  New York was the only city that failed to see a MoM gain of more than 1%.

On an annual basis, the composite indices were up ~19%, while Phoenix was up the most at +29.3%.  San Diego ranked 2nd at +27.05% followed by Seattle in third at +25.03%.

We’ve been waiting to see how long it would take for all of the cities tracked by S&P/Case-Shiller to eclipse the highs in home prices that were made during the housing bubble of the mid-2000s.  While many cities like Denver and Dallas passed their prior all-time highs as long ago as 2013, some cities like New York, Miami, Las Vegas, and DC didn’t make new all-time highs until recently after the pandemic hit.

Below is a look at where home prices currently stand relative to their prior housing bubble highs.  Every single city except one — Chicago — has now eclipsed its mid-2000s highs.  Las Vegas was the most recent to make a new all-time high in June.  Prices in Vegas are now 2% above where they were at their peaks in late 2006.  And in 2006, prices had gotten pretty ridiculous in Vegas!

While Chicago is the only city tracked by S&P/Case-Shiller where prices are still in the red versus prior highs, they’re now only 1% away from a new high, and we’ll probably see that new high when the next Case-Shiller report is released later this month.

Below are S&P/Case-Shiller home price index charts for all of the cities tracked along with the three composite indices.  Chicago is the only city not currently trading at an all-time high.

Finally, the chart below shows how much home prices have risen since COVID hit.  Most cities have seen home prices rise between 19-23%, but Phoenix, San Diego, and Seattle have been standouts with gains of more than 30%.  On the lower end of the spectrum, New York and Chicago have seen the smallest gains at 17%.  Click here to view Bespoke’s premium membership options.

S&P/Case-Shiller sources: FRED website or here at S&P Global.

Is there anything more annoying than when you sit down to watch a show or movie on Netflix (NFLX) and you get the dreaded buffering symbol where the show pauses until the connection is strong enough to load?  A lot of people around the country from the coast of Louisianna right up north through the coast of Maine are likely experiencing that buffering a bit more frequently as Hurricane Ida disrupted power and internet connections.  Investors in Netflix (NFLX) stock have been no strangers to the buffering phenomenon recently as the stock has been stuck in a trading range seemingly as long as the movie “The Never Ending Story.”  From July of last year through Wednesday, NFLX traded in a range within a high of $593.29 to a low of $458.60 for a spread of 29.4%.  Yesterday, though, NFLX finally broke out of that range trading as high as $598.76.

29.4% may not sound like too small of a range, especially for a stock with a market cap of over $250 billion.  For a stock like NFLX, though, 29.4% was the narrowest one-year range the stock had ever traded within.  The chart below shows the historical one-year trading range for NFLX since its IPO in 2002.  Prior to this year, NFLX had never traded within a range of 50% or less over a rolling one-year period, but as of this week, the range had narrowed to nearly half that.  Just like with the movies, though, usually when it buffers once, it runs through a number of fits and starts before it starts running smoothly again.  Similarly, even though NFLX started to move yesterday, today it has drifted right back into the range it was trading in all this time.  Click here to view Bespoke’s premium membership options.

In a sign that overall levels of anxiety across the United States may be receding, the pace of background checks for the purchase of firearms has come crashing down from record-high levels.  From a peak of 4.69 million in March, background checks fell to 2.72 million in August.   That level is still the second-highest total for the month of August on record, but after a steady surge with the onset of COVID and the riots across the country last summer, there has been a sharp decline in total checks over the last few months.

On a y/y basis, background checks have really swung from one extreme to the other.  From last July to this June, total background checks experienced a 100 percentage point peak to trough swing falling from 79.2% down to a decline of 22.3%.  Over the last two months, the rate of decline has gotten less bad, but it is still at negative 12.8%.

You might surmise that such a large decline in background checks wouldn’t be good for the stocks of gun manufacturers, and you’d be partly right.  Below we show one-year charts of Sturm Ruger (RGR) and Smith and Wesson (SWBI).  While both stocks are down significantly from their 52-week highs, they’re also far from 52-week lows.  In the case of RGR, stock has pulled back from its 52-week high back in July, but for the time being it has generally held above the top end of its prior trading range from earlier this year.  In the case of SWBI, the stock really surged back in late June following a strong earnings report but has been quick to give back all of its gains.  Despite the large drop, though, it is still trading at higher levels now than it was in the first quarter of the year when levels of background checks were at record highs. Click here to view Bespoke’s premium membership options.