The Bespoke Report — 9/13/24 — T Minus 50
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August 2024 Headlines
Bespoke’s Morning Lineup – 9/13/24 – A Perfect Week?
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.
“If you can make it through the night, there’s a brighter day.” – Tupac Shakur
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After the worst week in months to start September, the S&P 500 has already rallied more than 3% this week, and if it can finish the day in the green today, it will have had its second ‘perfect’ week in a month (and second five -day perfect week this year). At this point, futures are cooperating with modest gains as declines in Adobe (ADBE) and Boeing (BA) have been offset by rallies in Oracle (ORCL) and RH. To hold on to those gains, though, they’ll have to get through Import Prices at 8:30 and Michigan Sentiment at 10:00.
Even after the gains this week, the S&P 500 remains down close to 1% this month, so September has already lived up to its reputation for being the weakest month of the year. If the month continues to follow the seasonal trend, bulls should remain on guard. The snapshot below from our Seasonality Tool shows that based on the last ten years, the upcoming one-month period has historically been one of the weakest periods for the S&P 500. Over the last ten years, the S&P 500’s median performance over the next month has been a decline of 1.79% which ranks in just the first percentile relative to all other one-month periods throughout the month.
That’s the bad news. The good news is that despite the next month being so weak, the next three months have historically been among the best periods of the year for the S&P 500. With a median gain of 4.65%, the SP&P 500’s performance over the next three months ranks in the 87th percentile relative to all other periods.
The composite chart below illustrates the pattern. While the back half of September typically experiences sharp declines, the last three months have been strong. To borrow a phrase from Tupac Shakur, who died 28 years ago today, “If you can make it through the night, there’s a brighter day.”
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The Closer – Fedwatching, PPI, Fund Flows – 9/12/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a recap of the earnings of Restoration Hardware (RH) and Adobe (ADBE) in addition to the latest FOMC news (page 1). We then recap today’s PPI data (page 2) before turning over to the Flow of Funds (Z1) report (pages 3 & 4). We finish with a recap of the long bond reopening (page 5).
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Bespoke’s Weekly Sector Snapshot — 9/12/24
Chart of the Day – Dividend Dogs
Sentiment Goes According to Seasonality
The typical seasonal September slump for stocks has left the S&P 500 down 1.5% month-to-date. Regardless of the rebound in the past few sessions, the weak start to the month has put a dampener on investor sentiment. In the final two weeks of August, the percentage of respondents reporting as bullish to the AAII Investor Sentiment Survey came in above 50%. Since peaking the week of August 22nd at 51.6%, bullish sentiment has now slid for 3 straight weeks and is down to 39.8%. That is the lowest level of bullish sentiment and the first sub-40% reading since the first week of June.
With the drop in bulls, bearish sentiment has been on the rise. Bears came in at 31% today which is the highest level in five weeks and right in line with the historical average for that reading since the start of the survey in 1987.
Bulls falling and bears rising would mean that the survey’s bull-bear spread has pivoted lower. The spread fell from a reading above 20 last week down to 8.8. While that is a significant drop, bulls still outnumber bears as has been the case for the past 20 weeks. Through the history of the survey, there have only been 13 other streaks of 20+ weeks of positive bull-bear readings, the most recent of which ended this past April at 24 weeks.
September has historically been a rough month for equities from a seasonal perspective. As such, sentiment has also tended to be weak. The charts below show the average bull-bear spread reading by month for all years since 1987 and so far in 2024. Sentiment is usually strongest at the bookends of the year (January and February) and tends to fall in the late-Summer with September marking the annual low.
This year has to some degree followed that pattern. Sentiment was strong in the first two months of the year and unusually carried through into March. Sentiment slumped in April but began to pick up through July before reversing lower in the past two months.
The AAII survey hasn’t been the only measure of sentiment to moderate lately. This week’s bull-bear spread in the Investors Intelligence survey similarly dropped with the weakest reading since last November. The NAAIM Exposure index was modestly higher but continues to show equity exposure was significantly higher a couple of weeks ago. All combined into our sentiment composite, sentiment favors bullishness, but to the weakest level in a month.
Like the AAII survey, although investor outlooks are not as rosy as they were previously, it has been an impressive streak of net bullish readings. Our sentiment composite has now come in with a positive reading for 20 straight weeks. That immediately follows a 24-week long streak that ended in April with only one week of bearish sentiment in between the two. Before that, there were only seven other streaks that lasted at least 20 weeks. In other words, it has been an impressively long stretch of bullish investor sentiment.
Bespoke’s Morning Lineup – 9/12/24 – Inflation to Employment
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“My business is hurting people.” – Sugar Ray Robinson
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
For much of the last three years now in a week with both CPI and PPI, these would easily be the most important reports of the week. Now that the Fed has shifted focus from inflation to employment, though, yesterday’s CPI report had much less than normal fanfare, and most traders probably didn’t even know there was a PPI report today. The flavor of the week now is weekly jobless claims. After trending higher for most of the year and hitting the highest levels in nearly a year in late July, the market (and the Fed) became concerned about jobless claims, so any additional increases raise concern about the economic outlook causing a sell-off in equities and buying in the treasury market.
Leading up to today’s PPI and jobless claims report, equity futures were trading modestly higher and holding on to Wednesday’s gains while treasury yields moved slightly higher. These equity gains follow a positive overnight session in Asia and morning gains in Europe where the ECB just announced a 25 bps cut in the benchmark rate to 3.5% which was in line with expectations.
Getting back to the economic data, PPI came in higher than expected on both a headline (0.2% vs 0.1%) and core basis (0.3% vs 0.2%), but the y/y readings were both in line with forecasts as July’s report was revised lower. Jobless claims, meanwhile, were largely in line with forecasts. Initial claims came in 4K higher than expected (230K vs 226K) while continuing claims were right in line.
What looked like a potentially gruesome day in the morning yesterday took a turn for the better as the day progressed. After trading down 1.6%, the S&P 500 finished the day up by 1.1%. Not only that, but the reversal also took what looked like a downside break of the 50-day moving average (DMA) and turned it into a successful test of that level. In terms of just days where the S&P 500 finished the day higher by over 1% after trading down over 1% earlier in the session, it was the first such positive reversal since 10/13/2022. For you market historians, 10/13/22 was the day after the 2022 bear market closing low.
For these types of 1% positive reversals in general, yesterday was the 52nd such day since 1990, and in the chart below we indicate each prior occurrence with a red dot. While most of these occurrences took place during periods of an upwardly trending market, they weren’t exclusive to that type of environment, and there were more than a handful of them during the bear markets associated with the dot-com crash and the Financial Crisis.
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The Closer – Intraday Reversal, Gas, CPI – 9/11/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin by showing the massive intraday reversal in equities and the 52-week low in gas prices (page 1). We then rundown today’s CPI data (pages 2 – 4) before turning to the strong 10-year note reopening (page 5) and finish with a recap of the latest petroleum stockpile data (page 6).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!