Bespoke’s Morning Lineup – 8/26/24 – Stronger Durable Goods Orders
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“Forget about style; worry about results. ” – Bobby Orr
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
If you missed Friday’s CNBC segment, you can catch it by clicking the image below.
While futures are higher versus fair value this morning, the magnitude of the gains is minimal at best for the S&P 500 and Nasdaq futures are indicated lower, so listless would be a good description of how things are looking to start the week, and it is the last week of August heading into Labor Day weekend after all. The key events to watch this week are PCE data on Friday and earnings from Nvidia (NVDA) after the close on Wednesday.
Durable Goods orders just hit the tape, and the headline number came in at more than double expectations (9.9% vs 4.0%), but ex Transportation, the report was slightly weaker than expected (-0.2% vs 0.1%).
The snapshot below from our Trend Analyzer shows the performance of various international equity markets on a dollar-adjusted basis. At the top of the list, US stocks have maintained their leadership role despite modest underperformance last week. With a gain of 18.7% YTD, SPY is outperforming the next closest ETF on the list – the MSCI All Country World Index (ACWI) – by nearly 300 basis points, and a primary reason that ETF is the second-best performing ETF on the list is because of the large weighting of US stocks! At the other end of the list, the only ETF on the list that was down last week was the Latin American 40 (ILF), and it is also the only one that’s down YTD. In other words, North and South America account for the best and worst-performing stocks this year. Sandwiched in between the US and Latin America, returns for the rest of the world are remarkably similar with YTD gains in the range of 12.1% (Europe) to 9.2% (Asia Pacific).
Looking more closely at the performance of the best (US) and the worst (Latin American) stocks this year, the chart below shows the YTD performance of both ETFs. While ILF underperformed SPY right out of the gate this year, the bulk of the divergence came in late May through June when SPY saw its YTD gain climb from around 5% to 15% while ILF moved entirely in the opposite direction.
As anyone paying attention knows, though, this year’s underperformance of ILF relative to SPY is simply a continuation of a trend that has been in place for several years. Looking at a 10-year comparison of the performance of the two ETFs, SPY has rallied nearly 240% while ILF has been worse than dead money with a decline of 9.5%.
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Brunch Reads – 8/25/24
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.
There’s No Place Like Home: On August 25th, 1939, The Wizard of Oz, hit the theaters. The story begins in sepia-toned Kansas, where young Dorothy Gale feels misunderstood and longs for a place “over the rainbow” where she can escape her troubles. When a tornado whisks her away to the vibrant, Technicolor world of Oz, she must find her way back home. Traveling down the yellow brick road, she meets the Scarecrow, who believes he lacks a brain, the Tin Man, who believes he lacks a heart, and the Cowardly Lion, who believes he lacks courage. They all represent a facet of human experience and come to teach Dorothy, and us, a deeper lesson about discovering our own strengths. As the story unfolds, we recognize Dorothy’s adventure back home as a timeless classic that continues to remind us that the qualities we seek (intelligence, love, courage, and a sense of belonging) are within us.
How A.I. Can Help Start Small Businesses (NYT)
Professors are encouraging students to use AI tools like ChatGPT to streamline business processes. Startups are using AI for everything from coding to marketing, allowing them to grow faster and attract investors. While there are challenges and limitations, AI is clearly a game-changer for entrepreneurs.
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The Bespoke Report – 8/23/24 – Two Big Questions
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. This week we focus on two big questions as we move through the month of August.
Daily Sector Snapshot — 8/23/24
Bespoke’s Morning Lineup – 8/23/24 – Positive Vibrations
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“We will keep at it until we are confident the job is done.”– Jerome Powell, 8/26/22
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The word of the week has been vibes. This morning, positive vibes steer the market as S&P 500 futures are up over 50 bps and the Nasdaq is poised to open 1% higher. There hasn’t been much in the way of headlines to support the rally, and while earnings results after the bell yesterday were positive, we can’t remember a time when stocks like Intuit (INTU), Workday (WDAY), Cava (CAVA), and Ross Stores (ROST) were considered market movers. For now, bulls will take the gains, especially after yesterday’s pullback which was also based on not much else besides some negative vibes heading into today’s Jackson Hole speech from Fed Chair Powell. That speech comes at 10 AM Eastern, and if Powell does anything less than lay the groundwork for a rate cut at the September meeting, look out.
Although August has historically been a weak month, it hasn’t lived up to its reputation as the S&P 500 has a MTD gain of 0.88%. With August and September traditionally being such weak months, you would think that the last week of August would be especially negative, but historically, that has not been the case. The chart below shows the S&P 500’s performance during the last week of August dating back to 1953 (when the five-day trading week in its current form went into effect).
Overall, the S&P 500’s median performance to close out August has been a gain of 0.53% with positive returns 58% of the time. In the last ten years, performance has been even stronger with a median gain of 1.14%, or more than double the long-term average. Within those last ten years, there have been some big swings. In 2015, the S&P 500 had its best final week to August with a gain of 4.17%, although that followed what had been a MTD decline of 10.0%. At the other extreme, in 2022, the S&P 500 had its second worst-ever final week to August when it fell 4.49% after Powell was direct and to the point at Jackson Hole saying that the fed was “committed” to doing the job of bringing inflation down and that higher interest rates would cause “pain”. Bulls still have the scars from that one, but as he said in that speech, “Restoring price stability will take some time”. In the two years since that speech, has Powell finally seen enough?
As mentioned above, the S&P 500 is up 0.88% so far this month, but historically speaking, there hasn’t been much of a relationship between how the market performs leading up to the last week of August and how it does in the final week. The only time there has been any connection is after a rough start to the month. As shown in the chart below, in the six years when the S&P 500 was down more than 6% MTD heading into the final week of the month, it was up in the final week all six times. Ironically, in the last 71 years, there have only been four other years where the S&P 500 has been up between 0% and 1% heading into the last week of August. Just another example of how “boring” August has been so far. Right?
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The Closer – West Coast Ports, PMIs, Affordability – 8/22/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look into the impact on US ports from Canadian rail strikes (page 1). We then review the latest PMI and regional Fed data (page 2) before shifting into the latest home sales (page 3) and how affordability is looking (page 4). We close out with a 30-year TIPS sale review (page 5).
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Bespoke’s Weekly Sector Snapshot — 8/22/24
Bulls Take Off
Even though the rally in the S&P 500 lost steam over the past week, sentiment has soared. The latest weekly survey from The American Association of Individual Investors (AAII) showed 51.6% of respondents reported as bullish, up from 42.5% in the week prior. That’s the first time in five weeks that the majority of respondents have been bullish.
Considering there was an even more elevated reading of bullish sentiment only a little over a month ago, it is worth mentioning how optimism has been consistently elevated recently. As shown below, a one-year rolling average of bullish sentiment shows that this week’s reading increased to 42.5% – the highest reading since October 2007. It is also a quick turnaround versus various points last year when it was down around the lowest levels on record.
While bullish sentiment is elevated, less than a quarter of respondents considered themselves bearish. At 23.7%, this week’s reading was also the lowest in five weeks. That’s also a quick turnaround from the more elevated reading of 37.5% reached only two weeks ago, and the 13.8 percentage point drop over the past two weeks is the largest decline in such a span since the week of November 16, 2023.
Those corresponding moves to bullish and bearish sentiment resulted in the bull-bear spread rising to 27.9. Based on the comparisons to bullish and bearish sentiment, again this is the most elevated reading in five weeks. Zooming out, that reading is elevated ranking in the 88th percentile of all weeks since the start of the survey in 1987.
$10,000 in Gold (GLD)
In today’s “$10,000 in…” series, we’re taking a look at the gold ETF (GLD). The SPDR Gold Trust (GLD) began trading nearly 20 years ago in November 2004. It marked the first time that investors could easily allocate funds to gold in a brokerage account.
When GLD began trading on 11/18/2004, it had total assets of just under $600 million after its first day of trading. By the end of 2004, AUM had more than doubled up to more than $1.3 billion.
Today, GLD has more than $68 billion in AUM. At its last quarterly filing, it held more than 26 million ounces of physical gold valued at more than $62 billion.
So what would a hypothetical $10,000 investment in the GLD ETF on its release date in November 2004 be worth today? As shown below, $10,000 would now be worth roughly $52,000. That’s an annualized return of about 8.73%. Not bad for a piece of metal, right?
How does that $10k investment in GLD when it began trading nearly 20 years ago compare to something like the stock market? If we use the S&P 500 ETF (SPY) as a proxy for US large-cap stocks, a $10,000 investment in SPY on the same day that GLD began trading back in November 2004 with dividends re-invested would be worth about $68,725 today. That’s an annualized return of roughly 10.2%, or about 1.5 percentage points better than GLD annually. You can see how both GLD and SPY got to their current levels in the chart below.
As always, past performance is no guarantee of future results!
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