The Closer – Factor Rotation, Winning Streaks, Leading Indicators – 8/19/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look into how the August sell off and recent rally correlates to rotation (page 1) followed by a check in on the S&P 500 and Nasdaq’s simultaneous winning streaks (page 2). After that, we provide some commentary on the leading indicator’s recessionary signals (page 3). We then preview this week’s Treasury auctions (page 4) before closing out with positioning data (pages 5 – 8).
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Daily Sector Snapshot — 8/19/24
Chart of the Day: Argentina (ARGT) ETF on Top
Yen Stalls After Historic Rally
While the moves in US equities in recent weeks have been extreme, the currency markets have been even crazier, especially in the Japanese yen. In early July, the yen was trading at its weakest levels in over 30 years (higher values in the chart below), and shorting the yen was ‘easy money”. Those rumors of the yen’s death proved to be exaggerated. Just like that, the decline in the yen stalled out, unleashing a stampede of shorts looking to cover causing one of the most extreme movements in the currency ever recorded. From its weakest point in early July to early August, the yen rallied a practically unheard-of 10%+. While the rally stalled in the short term, the USD/JPY cross remains down nearly 10% from its peak in early July.
To illustrate the gravity of this move, the chart below shows the rolling five-week (25-trading day) change in the USDJPY cross going back to the early 1970s. The current move ranks as the most extreme since the Financial Crisis and before that the Russian Debt default in 1998. While the recent chaos in the currency markets reverberated throughout financial markets, including equities, so far at least, the impact this time around has been downright tame relative to the two most recent periods of similar volatility.
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Alphabet (GOOGL) Turns Twenty
Twenty years ago to the day, the company running the world’s largest search engine went public. On August 19th, 2004, Alphabet (GOOGL) shares IPO’d at a split-adjusted price of $2.13. In the 20 years since, the stock has been a top performer in many aspects. Simply looking at the top line, revenues have exploded from $512 million in Q4 2003 to $84.7 billion in the latest quarter. Given its rise to become one of the six “trillion dollar market cap” companies, the stock has ripped higher an astounding 7,669% from its IPO price.
So how has Alphabet done in the 20 years since it went public versus other big winners in the stock market? Below is a look at the 30 stocks currently in the S&P 500 that are up the most over the last 20 years. As shown, these 30 names are all up more than 3,000% since GOOGL’s IPO, and GOOGL ranks as the 11th best. Unsurprisingly, the single best stock by a huge margin is NVIDIA (NVDA) with a gaudy 127,418% gain, but other mega-caps like Apple (AAPL) and Amazon (AMZN) have both put up better numbers than GOOGL as well. Additional names that have done better than GOOGL include Netflix (NFLX) with a 30,000%+ gain, Monster Beverage (MNST), Booking Holdings (BKNG), Intuitive Surgical (ISRG), Regeneron (REGN), Deckers Outdoor (DECK), and Salesforce (CRM).
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Bespoke’s Morning Lineup – 8/19/24 – Lucky Sevens
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“We’re using modern technology to revert to primitive kinds of human relations.” – Bill Clinton
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s late August, so it shouldn’t come as a surprise that the market tone is quiet to start the week, especially with earnings season winding down. The only report on the calendar this morning is leading Indicators at 10 AM, and for the rest of the week, the only other notable reports are initial claims (Thursday), new (Friday) and existing (Thursday) home sales, and flash PMI readings (Thursday) from S&P being the only other reports to look forward to. Besides these data points, though, the market will also be focused on Wednesday’s Fed Minutes, benchmark revisions to Non-Farm Payrolls, and Fed Chair Powell’s speech from Jackson Hole on Friday.
Overnight in Asia, Japan was down over 2% as the yen strengthened, and in Europe, the STOXX 600 is looking at modest gains of around 0.3%.
The week looks to be getting off to a quiet start, but if the S&P 500 can finish higher today it will stretch the current streak of daily gains to eight. That would be the longest winning streak since last November and tied with six other periods for the longest winning streak since 2009. At seven days now through last Friday, the current streak ranks as the 16th streak of seven or more days, and each of those streaks is indicated with red dots in the chart below. Four of the prior 7-day streaks occurred in 2013, another three were in 2017, and another five were clustered during the post-Covid bull market.
In today’s Morning Lineup, we looked at how the S&P 500 performed in the week and month following seven-day winning streaks since the Financial Crisis. To see the results of that analysis, sign up for a trial today.
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Brunch Reads – 8/18/24
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.
The Right to Vote: It’s an election year, and on this day in 1920, the 19th Amendment was ratified, granting American women the right to vote. The vote hinged on a single vote where 24-year-old Harry Burn, a member of the House of Representatives from Tennessee, had initially opposed but changed his vote after receiving a letter from his mother urging him to support suffrage. It was a monumental victory for the women’s suffrage movement led by figures like Susan B. Anthony and Elizabeth Cady Stanton. Also, it set the stage for the continued advancement of women’s rights in the US.
Here’s how people are actually using AI (MIT Technology Review)
AI is all around us now, whether we like it or not, and many of us are using it for different purposes and in different ways. Productivity may have been the name of the game to begin with, but the use of the new technology has gotten much more personal for many people. Meta Platforms CEO Mark Zuckerberg has been bullish on AI agents and assistants for quite some time now but maybe we’re already taking it a step further in using AI for companionship. The anticipated “killer apps” have yet to emerge, and its limitations leave plenty of room for error, so it’s still difficult to bet on the shape, or shapes, AI will solidify itself. [Link]
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Daily Sector Snapshot — 8/16/24
The Bespoke Report – 8/16/24 – Did I Miss Anything?
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Bespoke’s Morning Lineup – 8/16/24 – The More Things Change
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“Don’t think about the start of the race, think about the ending.” – Usain Bolt
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Markets are priced to close out a strong week quietly as equity futures are indicated modestly lower, and they took another modest downturn following the release of Housing Starts and Building Permits which both missed forecasts and dropped to the lowest levels since mid-2020. The only other release on the calendar for today is Michigan Sentiment at 10 AM. Outside of equities, we’ve seen larger moves in the Treasury market where the 10-year yield is down over 6 bps and crude oil is down over 2.5%.
It’s been a very impressive rally around the world since last Monday’s sharp sell-off, but one familiar aspect of the bounce has been that the US is once again leading the way. While the S&P 500 closed marginally above its 50-day moving average (DMA) on Wednesday, it convincingly broke through that level on Thursday, breaking through its short-term downtrend from the July highs and erasing all its August losses.
Over in Europe, the STOXX 600 has also rebounded, but it has yet to convincingly break back above its 50-DMA or its short-term downtrend of lower highs.
Japan was ground zero for last week’s decline and saw larger losses than any other global index. While it has also staged an impressive rebound, the TOPIX finds itself deeper in the hole as the 50-DMA has yet to come into play.
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