Bespoke’s Morning Lineup – 6/20/23 – Homebuilders Happy đĄđ
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âYouâre going to need a bigger boat.â â Martin Brody, Jaws
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
48 years ago today, the relaxing effect of swimming in the ocean permanently changed forever when the movie Jaws hit the screens in movie theaters nationwide. These days, as the market rallies to 52-week highs and just recently moved past the 20% bull market threshold, the bulls look like they may need a bigger boat to accommodate the growing ranks of investors looking for higher stock prices. The market has reached overbought levels in the short term, so it shouldnât surprise anyone to see at least a pause in the rally as we close out Q2 and shake out some of these new bulls.
In the here and now, futures are modestly lower this morning following up what was a negative start to the week for most international markets yesterday and further weakness this morning. Itâs going to be another quiet week again for economic data (after a busy one last week), although the earnings calendar is starting to modestly pick up. Today, the only two economic reports on the calendar are Building Permits and Housing Starts, and the only notable earnings report is from FedEx (FDX) after the close. The economic data was just released, and Building Permits exceeded forecasts while Housing Starts were much stronger than forecast with the headline reading coming in at 1.631 million versus forecasts for a reading of 1.430 million. While still an enormous beat relative to expectations, Aprilâs reading was revised lower by 71K.
Markets were closed for trading yesterday, but the National Association of Homebuilders (NAHB) announced yesterday that its homebuilder sentiment for the month of June came in at a level of 55 versus expectations for a level of 51 and up from last monthâs level of 50. The move back above 50 indicates that homebuilders have net positive sentiment for the first time since last July, ending a streak of ten straight months of 50 or sub-50 readings. You canât blame homebuilders for being in such a good mood given where the housing data came in this morning.
In looking at the historical chart of homebuilder sentiment, the current move above 50 started from a trough of 31 in December which is a level that historically has been associated with recessions. Also notable is the speed at which the index has rebounded from its trough. While not as quick as the rebound off the COVID lows, the magnitude of the reversal has been among the swiftest on record.
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Bespoke’s Brunch Reads – 6/18/23
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.
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History
âTear Down This Wallâ (National Archives)
Keeping with Bespokeâs Quote of the Day from Monday to commemorate the anniversary of the President Reaganâs famous speech that called for the Berlin Wall to be torn down, this publication tells the story of how the speech came to be despite the forces that suggested a softer approach. [link]
Economy
New Grads Have No Idea How to Behave in the Office. Help Is on the Way. (WSJ)
Recent graduates who spent much of their college and internship experience online are now learning the âsoft skillsâ they never did from being on campus and in the office. Many students say they are ready to ditch Zoom and begin in-person work lives to improve the skills they lack from their remote studies. [link]
Renters Are About to Get the Upper Hand (WSJ)
Rents rose 25% nationally in less than two years. Now, its fastest deceleration in recent history has brought that number to just 2%. The major shift could help ease inflation as housing costs make up the biggest component of CPI, but it will hurt investors who purchased buildings thinking they could continue raising rents. [link]
San Francisco hit again as large mall owner walks away (Yahoo Finance)
After last weekâs read about the cityâs largest hotel (Park Hotels and Resorts) halting payments toward its mortgage and making an exit from the area, Tuesdayâs newest closing spells more bad news for San Francisco. [link]
Corporate
Bud Light Loses Title as Top-Selling U.S. Beer (WSJ)
Modelo Especial is the new top-selling beer in the United States. Following a media debacle around a can featuring a transgender influencer, Bud Light sales have plummeted. Since April, boycotts have sent shares down 15% and distributors of the beer are facing tough financial decisions. Â [link]
Tesla Got Added to an ESG Index. But Oil and Tobacco Firms Scored Higher (Barronâs)
In an example of the road to hell being paved with good intentions, ESG investing has its merits, but in practice, some of the ways companies are rated is preposterous.[link]
Teslaâs âSelf-Drivingâ System Never Should Have Been Allowed on the Road (The American Prospect)
Tesla introduced self-driving technology in 2016 that made overstated and ambitious promises. Now that technology is associated with more crashes and fatalities than previously thought, and critics are calling for stricter regulations to improve safety. [link]
Microsoft and OpenAI’s Bromance Is Off to a Rocky Start (Gizmodo)
OpenAI and Microsoft are leading the âAI revolutionâ, but the situation is more complicated than that. Microsoft has invested billions of dollars in OpenAI, but OpenAI isnât owned by Microsoft outright. The two are not just partners, but also competitors working in the same sphere. Some Situations have raised tensions and trust issues. [link]
Home Depot Is Selling a Modern Tiny Home Kit Complete With a Rooftop Deck and a Spiral Staircase (My Modern Met)
Home Depot has collaborated with the architecture firm Plus 1 to bring a DIY tiny home kit to life. Priced at $43,832, this tiny home comes with a number of luxurious features. You have to check some of these places out! [link]
Science and Technology
A Day on Earth Used to Last Only 19 Hours. Now We Know Why. (ScienceAlert)
We all wish we could have 25 hours in a day, but consider yourself lucky that you werenât alive 1.4 billion years ago when days were only 19 hours! As the Moon moves further away from Earth, our planetâs rotation slows down, lengthening the day. The research provides valuable insights into Earthâs geological history and the relationship between our planet and the Moon. [link]
Is Betelgeuse About to Become a Supernova? (Discover Magazine)
In late 2019, Betelgeuse, a red supergiant star, exhibited unprecedented dimming, sparking speculation about an imminent supernova event. Scientists concluded that it could be hundreds of thousands of years away. Now, that supernova may be close, as it behaves oddly again and has brightened 50% in the last month. [link]
Investing
New report flashes a warning light over 401(k) account balances (CNN Business)
Alarms have gone off after a report shows 401k balances were down well below 2021âs averages in 2022. The average 20% haircut was driven by the declines in equity and bond markets over the course of 2022. Households also faced financial stress and withdrew from retirement savings. [link]
AI Stock Pickers Grapple With Dot-com DĂ©jĂ vu (Yahoo Finance)
Investors are being reminded of the dot-com era as technological advancements in AI begin to cause a market frenzy. AI is still in the early stages of development with seemingly unlimited potential, but that makes for FOMO and the ability to decipher winners and losers in the market tough to grapple with. [link]
U.S. Government Owns Way More Bitcoin Than Any Other CountryâSo Why Arenât They Selling It? (Forbes)
While none of it was purchased seizures in criminal enterprises have allowed the US Federal Government to amass a larger pile of bitcoin than any other country in the world. Why havenât they sold any? [link
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Have a great weekend!
The Bespoke Report Newsletter — 6/16/23
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Daily Sector Snapshot — 6/16/23
Bespoke’s Morning Lineup – 6/16/23 – One Way Ride
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.
âOnce you know where the roller coaster is going, are you in for the ride?â â Robert Fulghum
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
It’s looking like a flat open to cap off what has been a very strong week, and once again the Nasdaq is outperforming after Adobe (ADBE) reported better-than-expected earnings last night after the close. It’s a quiet day for data, but Fed Governor Waller had some relatively hawkish comments and the University of Michigan Sentiment report will be released at 10 AM. The key item to watch in that report is inflation expectations.
139 years ago today, the first roller coaster in the United States opened in Coney Island, and for âjust a nickelâ, customers could get on board for the thrill of riding six miles an hour through twists and turns of metal and wood. Roller coasters have come a long way since their first introduction in terms of both speed and ups and downs, but If the stock market is a ride, these days the only direction it goes is up.
The S&P 500 closed back above 4400 yesterday and finished in positive territory for the eighth time in ten days. For the last ten trading days now, the S&P 500 has closed more than two standard deviations above its 50-day moving average (what we call short-term âextremeâ overbought levels), and yesterday almost closed three standard deviations above its 50-DMA (+2.97). That was its most overbought close since November 2004 which was right after George W Bush won re-election over John Kerry.
Streaks of at least ten trading days of extreme overbought (OB) readings for the S&P 500 havenât been especially common over the years. Since 1952 when the five-trading day week started, there have now been 35 such streaks. The most recent was in April 2021, and the longest was 17 trading days in December 1995.
Looking at more recent history, the chart below shows the S&P 500 going back to 2000 with the red dots showing each prior ten-day streak of extreme overbought closes (each dot represents the 10th trading day in the streak). While none of these prior streaks occurred near a market low, they didnât represent short-term or long-term peaks either. The closest any of these streaks occurred to a peak was in April 2021- more than seven months before the ultimate peak.
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The Closer – IPO Comeback, Regular Hour Trading Alive and Well, 5 Fed – 6/15/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with an update on the IPO market (page 1) followed by a dive into the historic divergence between performance after hours and intraday (page 2). We then take a look at TIC flows (page 3), update our Five Fed Composite (page 4), industrial production (page 5), and housing market data from Zillow (page 6).
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Bespoke’s Weekly Sector Snapshot — 6/15/23
B.I.G. Tips – Retail Sales: Upside Surprise
Chart of the Day: New High for Tech
The Bespoke 50 Growth Stocks — 6/15/23
The âBespoke 50â is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespokeâs analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were no changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. With Bespoke Premium, you’ll receive a number of daily market updates from us along with our weekly newsletter and a portion of our investor tools. With Bespoke Institutional, you’ll receive everything that’s included with Premium plus additional daily macro analysis and more stock-specific research.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investorâs individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.