Bespoke’s Weekly Sector Snapshot — 12/21/23
The AI Race is Closer Than It Seems
The keyword of the year in markets has been AI, and besides Nvidia (NVDA), whose chips power most of the AI-related applications, two of the most high-profile companies competing in the sector have been Alphabet (GOOGL) and Microsoft (MSFT). Most people forget, but it was back in 2016, six years before Chat-GPT even came out, that Alphabet CEO Sundar Pichai declared that Google was an “AI-first company.” Pichai may have been ahead of the game, but when Chat-GPT first launched late last year, it was MSFT that found itself in the pole position while the consensus quickly declared that Alphabet missed the boat on AI. This sentiment was reinforced throughout the year as there were numerous points where Alphabet made negative headlines due to its shortcomings in AI.
Given the headlines, you’d think that the amount of daylight between the performance of MSFT and GOOGL this year would be wide, but the charts say otherwise. As shown in the charts below, they’re both on pace to close out the year right near their highs, and it’s GOOGL that is closer to a new high. Not only that but on a YTD basis, it’s GOOGL (58.99%) that is outperforming MSFT (54.9%) rather than the other way around.
To be fair, since the launch of Chat-GPT on 11/30/22, MSFT is still outperforming GOOGL, but the gap between them has been narrowing. With MSFT up 45.5% and GOOGL up 38.8% since Chat-GPT introduced itself to the world, less than seven percentage points separates the two stocks. What’s notable about the performance of the two during this time is that while MSFT has been in the lead most of the time, there have been multiple periods where the lead shifted between the two. The AI race between GOOGL and MSFT has been a lot closer than this year’s headlines would have you believe.
Chart of the Day – Brazil Breaking Out
Bespoke’s Baskets Update — December 2023
Bespoke’s Morning Lineup – 12/21/23 – Two Extremes
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“There was no established way for a man to tell his wife he was going to the moon. A man could tell his wife he was going to sea or going to war; men had been doing that for millennia. But the moon? It was a whole new conversation.” – Apollo 8: The Thrilling Story of the First Mission to the Moon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Treasury yields are doing little this morning and equity futures are looking to reclaim some of yesterday’s afternoon weakness. Crude oil and copper are modestly lower, while gold is flat. In Europe, stocks are lower as markets there closed before yesterday’s afternoon reversal. On the economic calendar, there’s a ton of data to be on the lookout for including revised GDP, Personal Consumption, Core PCE, jobless claims, Philly Fed, Leading Indicators, and finally the KC Fed report at 11 AM.
It was a tale of two markets yesterday. In the morning, the S&P 500 rallied to new 52-week highs only to give it all back and more in the afternoon. By the time the closing bell rang, stocks were at the lows of the day and finished down over 1%. There aren’t many places in the world where you can go skiing in the morning and swim in the ocean in the afternoon, but the market did its version of that yesterday.
While yesterday’s reversal was jarring, in the context of a daily chart of the S&P 500 ETF (SPY), it barely looks like anything more than a blip. Even after yesterday’s decline, SPY is more than 5% above its 50-day moving average (DMA) and more than 8% above its 200-DMA.
While yesterday’s reversal doesn’t look like much on a one-year chart of SPY, in the ETF’s history dating back to 1994, reversals of that type have been incredibly uncommon. The last time the ETF traded at a 52-week high on an intraday basis but finished the session down over 1% was back in April 2014, and in the ETF’s near-30-year history, there have only been seven other occurrences before yesterday. In the chart of SPY below, we have marked where each of those prior reversals occurred with a red dot. As shown, none of the prior occurrences marked a significant top for the market. In today’s Morning Lineup, we provided an analysis of SPY’s performance following prior reversals. Sign up to read the entire report.
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The Closer – Petrol Demand Destruction, Affordability, CFO Survey – 12/20/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin tonight with a note on how EVs have displaced fuel demand (page 1) followed by a dive into existing home sales (page 2) including an update on affordability (page 3). We then review today’s 20 year bond reopening (page 4), the latest CFO survey (page 5), and finally the latest petroleum stockpile data (page 6).
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Daily Sector Snapshot — 12/20/23
Fixed Income Weekly — 12/20/23
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
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Chart of the Day – Most Sectors Hit 52-Week Highs
Bespoke’s Morning Lineup – 12/20/23 – Perfect Ten?
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“What good is the warmth of summer, without the cold of winter to give it sweetness.” – John Steinbeck
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 finally starting to get colder here in the northeast, and that coupled with the shorter days quickly makes us miss the warmer weather and longer days of the summer. While the temperature is likely to only get colder from here in the coming weeks, if there’s any consolation, tomorrow is the shortest day of the year which means that the days only get longer from there. Applying the forward-looking nature of the market, winter is over!
Traders are coming in today to the warmth of red on their screens as equity futures and treasury yields are both lower. On the economic calendar, we’ll get Existing Home Sales and Consumer Confidence at 10 AM. On the earnings front, the notable reports since yesterday’s close were FedEx (FDX) and General Mills (GIS). Both stocks are trading lower in reaction to their results after management from each company lowered guidance. FDX is getting hit the hardest, though, as the stock is down over 10% and GIS is down 4%. If the declines in FDX hold through the close, it will be the stock’s worst earnings reaction day performance since December 2019.
Like the warmth of summer, it’s hard to fully appreciate a rally without first going through some weakness, and that made the late summer/early fall correction the perfect prelude to the current year-end rally. Heading into today, the Nasdaq has seen nine straight days of gains which is the longest winning streak since – wait for it – November 8th. That’s right. Since the October lows, the Nasdaq has now had two separate nine-day winning streaks. To find a time when there were two winning streaks of nine or more days in closer proximity to each other, you have to go back to 1979!
In the history of the Nasdaq dating back to 1971, it has had 48 different winning streaks of at least nine days. While they aren’t particularly uncommon, what makes the current streak a little more unique is that it has also come as the Nasdaq closed at overbought levels (1+ standard deviation above 50-DMA) on each day of the winning streak. Of the 48 prior streaks, only 16 shared that same trait with the current streak. In today’s Morning Lineup, we provided an analysis of the Nasdaq’s performance following prior nine-day winning streaks along with nine-day winning streaks that occurred when the index closed at overbought levels on each day of the streak. Sign up to read the entire report.
Separately, we’ve had some issues with our email deliverability lately, especially with corporate email addresses that have security filters that automatically click every link in our emails to check that the links are safe. Unfortunately, this “auto-click” process sometimes clicks the “unsubscribe” link in our email as well, which removes the email from our mailing list. One thing you can do to prevent being automatically unsubscribed is to add @bespokeinvest.com as a safe sender in your email software. If you have an IT department, please check with them if you need help.
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