Bespoke’s Morning Lineup – 11/6/23 – Please Don’t Go
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.
“I am a slow walker, but I never walk back.” – Abraham Lincoln
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
The market is catching its breath this morning after the big moves of last week. Equity futures, treasury yields, and crude oil are all modestly higher while the dollar follows through on its declines from last week. There’s very little in the way of economic data this morning, and the pace of earnings has been relatively slow so far, but the pace will pick up later this afternoon and into tomorrow as earnings season remains in full swing- at least in terms of the number of reports.
Last week’s 5.82% gain for the S&P 500 was the best week of the year and the best week for the major US benchmark since the week ending November 11th from last year. With geo-political tensions remaining hot, earnings looking not so hot, and interest rates surging, the prospects for equities looked dim. You couldn’t fault an investor for thinking that it may be a good time to lighten up and sit things out for a bit until things cool off and some of the uncertainty recedes. As the market tends to prove time and time again, though, just when things look their worst, the market has a way of going the other way. In addition, timing the market remains one of, if not, the most difficult aspects of investing. Without fail in the markets, the best weeks tend to come when they’re least expected.
The chart below shows the growth of $100 invested in the S&P 500 at the start of 2010 (dividends not included) on both a buy-and-hold strategy as well as if an investor missed out on the best week of each calendar year. The gap is enormous. While the original $100 is now worth $390.85, had you missed out on the best week of each year, you would have less than half of that amount at $193.55. In other words, well over half of the gains since 2010 can be attributed to those 14 weeks. Admittedly, you could make the counterargument that most of the losses during this period have also occurred in a small number of weeks, but trying to successfully anticipate when these good weeks or down weeks will occur is IMPOSSIBLE. As “KC and the Sunshine Band” advised in 1979, “Please Don’t Go”.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Bespoke’s Brunch Reads – 11/5/23
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 trial!
On This Day in History:
A Third Term: On November 5, 1940, the 32nd President of the United States, Franklin D. Roosevelt, was re-elected. It was not just any re-election though, because his term beginning the following January would mark his third and prove to be much different than his first two, which are remembered in history by the New Deal programs (as featured in last Sunday’s Brunch Reads). By the time FDR was re-elected in 1940, the world had already been deeply engaged in war for more than a year, and the US would formally get involved by the end of 1941.
FDR’s decision to run for a third term was not without controversy. Traditionally, US presidents had adhered to the two-term limit established by George Washington. However, Roosevelt’s popularity, his ability to inspire confidence, and the exceptional circumstances of the times convinced many that he was the right leader for the moment. FDR faced Republican Wendell Willkie, a businessman and political outsider, but his proven resume in the Oval Office earned him the majority of votes. Ironically, FDR’s leadership assured Americans that he would keep the US out of World War II.
FDR’s third term in office would be marked by his efforts to guide the nation through World War II and establish the United States as a leading global power, shaping the course of history for years to come. It was an unprecedented decision by American voters, but one seen as necessary at a time when war threatened the whole world.
AI & Alterations
Did ESPN really think nobody would care that they deepfaked a Damian Lillard interview? (Deadspin)
ESPN faced criticism for altering a video of Damian Lillard to make it appear as if he was discussing playing for the Milwaukee Bucks. In reality, the video was from 2020 when Lillard played for the Portland Trail Blazers. ESPN digitally manipulated the video, replacing the interviewer with an ESPN mic and placing Lillard in a Bucks uniform before sharing it as if it had just happened. The article highlights the ethical issues in modern sports media, where clicks and social media engagement often outweigh journalistic integrity. It also raises concerns about AI-generated content. [Link]
Google and Microsoft Bet on 27-Year-Old Stanford Alum to Make AI Work For a Billion Users (Bloomberg)
Karya, a startup, is employing workers in rural Indian communities to gather data in vernacular languages. These workers are paid up to 20 times the minimum wage for their efforts, providing high-quality Indian-language data that tech companies require for their AI products. Karya’s initiatives are supported by companies like Microsoft, the Bill & Melinda Gates Foundation, and Google, which aims to build generative AI models for 125 Indian languages. [Link]
Listen to the ‘final’ Beatles song, ‘Now and Then,’ made with help from AI (Engadget)
Paul McCartney and Ringo Starr, the surviving Beatles, used machine learning technology to work on a new song, “Now and Then,” which is being promoted as their final track. It was made from a demo track in the 70s by separating Lennon’s vocals from the piano without audio bleed. While it may not become their most beloved song, it showcases the power of new machine-learning technology to bring our favorite artists back to life. [Link]
Nature
Cicadas Are ‘Little Hamburgers Falling From The Sky,’ Disrupting The Food Web Every 17 Years (DCist)
Brood X periodical cicadas, which emerge once every 17 years, create an easily accessible food source for various species in the local ecosystem. Bird species consumed cicadas, reducing their consumption of caterpillars. This led to a thriving caterpillar population and increased oak leaf consumption. The research suggests that cicada ’emergences’ can have far-reaching effects on local ecosystems, potentially even influencing phenomena like mast years in oak tree acorn production. [Link]
Media & Entertainment
X, formerly Twitter, is giving employees equity at a $19 billion valuation—(Fortune)
Just a year after Elon Musk purchased Twitter for $44 billion, the re-named X is now being valued at just $19 billion based on the company’s equity compensation plans. Since the deal closed at what was widely agreed as an overvalued price, the company has struggled with weak advertising sales and a heavy debt load, but Musk still has visions of turning X into the ‘everything app’ which will combine social media with payments and commerce. One barrier to that goal, however, is the fees the Apple app store charges on various transactions. [link]
Crisis at Marvel: Jonathan Majors Back-Up Plans, ‘The Marvels’ Reshoots, Reviving Original Avengers and More Issues Revealed (Variety)
Marvel, which has enjoyed a remarkable run of success with its superhero films, is facing several challenges and disappointments in its recent ventures. The COVID-19 pandemic prompted the studio to accelerate its plans for creating interconnected content for Disney+, which strained its resources and led to some audience confusion. Quality issues have arisen in various productions, and the demands of producing so much content have put a strain on the VFX department. Furthermore, the legal issues surrounding actor Jonathan Majors, who was expected to play a major role in the Marvel Cinematic Universe, have prompted the studio to reconsider its plans. [Link]
Real Estate
Home Sellers Win $1.8 Billion After Jury Finds Conspiracy Among Realtors (NYT)
A federal jury has found the National Association of Realtors and major brokerages guilty of conspiring to inflate commissions paid to real estate agents. They’ve been ordered to pay nearly $1.8 billion in damages, which could rise to over $5 billion. This decision may change how real estate commissions work, reducing costs for home sellers. It allows agents to set their own rates and could result in lower fees. [Link]
The Auto Strike
Toyota raised wages immediately after UAW deals (Axios)
Toyota has increased the wages of its non-unionized factory workers in the United States following recent pay hikes for unionized employees at General Motors, Ford, and Stellantis. The details of the wage increases at Toyota have not been confirmed, but they are seen as part of a broader push by the UAW to expand its organizing efforts beyond the “Big Three” automakers. UAW President Shawn Fain has expressed the union’s intent to organize non-union auto workers to boost pay and improve labor conditions. [Link]
Read Bespoke’s most actionable market research by joining Bespoke Premium today! Get started here.
Have a great weekend!
The Bespoke Report – 11/3/23 – Race To The Plate
To read our weekly Bespoke Report newsletter and access everything else Bespoke’s research platform has to offer, start a two-week trial to Bespoke Premium.
Daily Sector Snapshot — 11/3/23
A Boomerang Bounce for US Stocks
It has been a great week for the US stock market with the S&P 500 ETF (SPY) up 5.9%. Unfortunately, that only gets the market back to where it was trading just over two weeks ago on October 17th! That’s because SPY fell 5.9% from 10/17 through last Friday (10/27).
Right now SPY is stuck in a short-term downtrend after making a series of lower highs and lower lows since the end of July. From a technical perspective, SPY needs to make a “higher high” for things to look more positive. Today, the ETF got stuck as it approached its highs from mid-October, so it’s not going to be easy.
The rally this week has been broad based, but the best performing stocks have been the names that did the worst in the 10 days prior. Below we’ve broken the large-cap Russell 1,000 into deciles (10 groups of 100 stocks each) based on stock performance during the market’s decline from 10/17 to 10/27 (last Friday). As shown, the decile of the worst performing stocks during the 10/17-10/27 pullback is averaging the strongest gains during this week’s rally.
Looking at individual stocks, below are the 30 best performing names this week in the Russell 1,000. At the top of the list is Roku (ROKU), which is up more than 50%! Another eight stocks are up more than 25% this week, including names like DoorDash (DASH), DraftKings (DKNG), Pinterest (PINS), Paramount (PARA), and Palantir (PLTR). Other noteworthy stocks up big this week include Wayfair (W), Block (SQ), Avis (CAR), Warner Bros. (WBD), Coinbase (COIN), TopBuild (BLD), and even Peloton (PTON).
We’ve got much more coverage of this week’s rally and it’s underlying strength in our weekly Bespoke Report newsletter. The Bespoke Report is available with a 30-day trial to Bespoke Premium, which you can sign up for quickly and easily here.
Bespoke’s Morning Lineup — Doing the Impossible — 11/3/23
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.
“There is nothing wrong with change.” – Joe Maddon
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Seven years ago today, the world woke up to what had been previously thought impossible as the Cubs won the World Series for the first time in 108 years. In typical Cubs style, they didn’t make it easy on themselves; the win came in extra innings of game seven…after a rain delay! There was a lot of excitement in Chicago on November 3, 2016, but no one was happier than Steve Bartman who became the scapegoat of the team’s collapse in game six of the 2003 NLCS when the Cubs blew a 3-0 lead in the eighth and then went on to lose in game seven after blowing a 5-3 lead and losing 9-6 to the Marlins.
The Marlins then went on to win the World Series in six games over the Yankees. Naturally, since the Cubs should have beaten the Marlins, who then went on to beat the Yankees, the Cubs should have won the World Series, and it was all Bartman’s fault. It makes perfect sense, and if you ask any Met fan, they’ll agree.
While not quite as impressive as the Cubs winning the World Series, the market did what seemed impossible on Wednesday by rallying at least 1% on a Fed Day and then rallying more than 1% the next day as well. Fed days lately have been anything but bullish, and like clockwork, you can usually depend on the market selling off right when Chair Bartman steps up to the podium. Wait, does that say Bartman? On Wednesday, though, the S&P 500 traded higher into the press conference and then kept rallying from there and finished near the highs on both days!
In reality, the S&P 500’s two-day rally on Wednesday and Thursday was only the strongest gain on a Fed Day and the day after since the day of and day after the July 2022 meeting. Just like Bartman, Powell probably doesn’t deserve all the blame, but just like Cubs fans when things didn’t go their way, investors are always looking for a scapegoat, and Powell has become the obvious choice. As bad as it has been for Powell over the last two years during this hiking cycle, at least he can go out to dinner this weekend without fearing the mob. It took Bartman 13 years!
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
The Closer – AAPL Earnings, Productivity, Housing Inventories- 11/2/23
Log-in here if you’re a member with access to the Closer.
Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look into the latest earnings (page 1) followed by a rundown of today’s productivity and labor cost data (page 2). We then review the latest factory orders (page 3) and housing inventory figures (page 4).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Bespoke’s Weekly Sector Snapshot — 11/2/23
Bears Shrug Off a Rally
Even though the S&P 500 has moved decisively higher over the past week, sentiment has entirely shrugged off price action. The percentage of respondents reporting as bullish to the AAII’s weekly sentiment survey dropped back below 25% versus a reading of 29.3% last week. Bullish sentiment has now dropped for three straight weeks, having fallen 15.7 percentage points in that span for the largest three-week decline since August 24th. That has also resulted in the lowest bullish sentiment reading since May 18th.
That was matched with a rise in bearish sentiment back above 50%. That was the first time a majority of respondents reported as bearish since last December. As shown in the second chart below, the 44 consecutive weeks weeks without such a reading is sizeable, but far from any sort of record.
With new near-term lows in bulls and highs in bears, the spread between the two widened to 26 points in favor of bears. That is the most negative bull-bear spread reading since March
Other sentiment surveys echoed that negative tone among investors. The NAAIM Exposure Index was actually slightly higher week over week, although it continues to show low levels of long equity exposure. Meanwhile, like the AAII Bull-Bear spread, the Investors Intelligence survey also indicated the most bearish reading since March. Put together, our sentiment composite is now back below -1. That means the average sentiment reading is a full standard deviation more bearish than its historical average for the weakest reading since the first week of the year. Although current readings are rather pessimistic, due to the timing of data collection, the results would not have captured any response in sentiment following the FOMC on Wednesday. In other words, next week we will get a read if the latest updates on monetary policy had any effect on investor pessimism.
Continuing Claims Keep On Rising
Following up on yesterday’s slowing ADP and JOLTS numbers, today’s release of weekly jobless claims likewise showed a cooling labor market. Initial claims were revised up by 2K last week to 212K, and this week’s number came in higher at 217K. That was 7K above expectations which would have assumed no change to claims. With the rise over the past two weeks, claims have now rounded out a bottom but still have significant headroom until reaching the highs from earlier this year.
Before seasonal adjustment, claims were slightly higher at 196.8K. That increase is consistent with seasonal patterns as claims tend to rise throughout Q4. For example, the current week of the year has historically seen claims rise week over week 83.9% of the time; one of the most consistent weeks of increases of the year. Granted, claims are experiencing the usual seasonal increase and have bottomed after seasonal adjustment, but current levels remain historically strong. For instance, this week’s NSA number is right inline with those readings of the comparable week of the couple of years before the pandemic and 2022.
Continuing claims are a less rosy picture with a much greater and more consistent increase over the past several weeks. Since the recent low of 1.658 million put in place in early September, continuing claims have risen 9.65%. As shown below, that is certainly on the large side of historical increases in such a time span. In fact, most other times (though not always) claims have risen that rapidly, the economy has been in recession. Given that rise, seasonally adjusted continuing claims topped 1.8 million this week, which is the most elevated reading since April 15th and is only 43K below the recent high from the spring. Zooming further out, though, claims remain at historically strong levels.
